Argo Group, South China Resources eye Malampaya oil rim

US-based Argo Group and local oil exploration firm South China Resources Inc. have expressed interest in the oil rim development at the Malampaya field in northwest Palawan, a ranking energy official said.

Energy Undersecretary Guillermo Balce said the two firms may likely join the Philippine National Oil Co. (PNOC) in the bid to drill oil at Malampaya covered by Service Contract (SC) 38 as Malacañang has authorized the issuance of another SC for the oil rim.

The Argo Group has direct operational experience in producing oil from the Malampaya oil rim as it had conducted the extended well test production from exploratory MA-10 well in late 2001.

Since April last year, the Argo Group, headquartered in Houston, Texas – had made presentations to the Department of Energy (DOE) regarding their plan to develop the oil rim.

South China, on the other hand, is engaged in the exploration, development and production of oil and gas in certain areas in the Philippines.

Balce said they intend to issue the new SC for the Malampaya oil rim on or before the end of this month.

After the SC issuance, the DOE can then formally start forming a consortium that would develop the oil rim.

"Total investment (on the oil rim) depends on the winning third party bid to be selected by PNOC," Balce said.

Interested investors in the oil rim would have to shell out between $700 million to $900 million in development cost, which is deemed too expensive compared to the area’s 25 to 40 million barrels of estimated oil reserves, equivalent to only two months of supply for the country.

The DOE official said they have already agreed to the conditions set by the original consortium led by Shell Phils. Exploration B.V. (SPEX) when it relinquished its rights to the project.

"We are in agreement with SPEX. We’re finalizing the SC for PNOC," he said.

Aside from Argo and South China, Korea Gas Corp. (Kogas) is also looking at the possibility of developing the Malampaya oil rim.

Kogas has long been interested in the Malampaya project. In 2004, it negotiated with the government for the possibility of buying the 4.9 percent stake held by PNOC-Exploration Corp. in the Malampaya project.

Kogas has formed a consortiumtogether with Seoul City Gas, LG International Corp and Daesung Industrial Co. Ltd. bid for PNOC-EC’s 4.9 percent stake.

The Korean oil firm is one of the major operators of the largest liquefied natural gas (LNG) terminal in the world with a storage capacity of over 2.24 million cubic meters.