DOE drafting EO to award Malampaya oil rim exploration, development to PNOC-EC

The Department of Energy (DOE) is drafting an executive order (EO) to effect the award to PNOC-Exploration Corp. (PNOC-EC) of the right to explore and develop the Malampaya oil rim in Palawaan, the country’s top energy official said.

Energy Secretary Raphael P.M. Lotilla said the issuance of an EO would resolve the issue of whether PNOC-EC has the legal basis in developing an oil field within Malampaya as covered by Service Contract (SC) 38.

"We need a legal basis. It would come from President Arroyo. We will have the EO within the year," he said.

Lotilla said the EO will also enable the DOE to issue a new SC to PNOC-EC to develop an oil field beneath the $4.5-billion Malampaya deepwater-to-gas power project in northwest Palawan.

Lotilla said it would be up to PNOC-EC to find a partner to undertake the oil rim development.

The energy chief noted that the Malampaya project’s major operator, Shell Philippines Exploration B.V. (SPEX), has indicated support for the entry of a third party to develop the oil rim.

The consortium, composed of SPEX (45 percent), Chevron-Texaco(45 percent) and PNOC-EC (10 percent), has decided to relinquish its right to the oil rim development after proving that the oil under the Malampaya natural gas field is not commercially viable.

The SC 38 consortium, in deciding to relinquish its rights to the oil rim, said it is willing to work together with the DOE and the third party "subject to conditions that will safeguard the integrity of the natural gas reservoir and the existing development and offer reasonable indemnity to protect the gas project from the impacts that arise from the oil rim development."

The Malampaya oil rim, estimated to contain up to 40 million barrels of oil, is covered by SC 38. "DOE will issue the SC to PNOC then other players can get on board," Lotilla said.

The DOE has directed PNOC to take the lead in developing the Malampaya oil rim

After SPEX’s announcement relinquishing the rights to the oil rim, DOE opened the project to other international and local oil companies.

"While we note that the SC 38 consortium considers the oil rim non-commercial based on their economic parameters and standards of operation, we look forward to tapping other oil companies that consider the oil deposits viable to produce," Lotilla said.

He said he is optimistic that they could start a partnership with a third party "soonest to optimize the opportunities in the development of the oil rim for the benefit of the Filipino people and with reasonable returns for participating third parties."

Several foreign firms such as AustralAsian Energy Ltd., US-based Argo Group, PetroEnergy Resources Corp. (PERC), South China Resources Inc. and Norwegian firm Petroleum Geoservices Inc. have earlier expressed keen interest to develop the oil rim.