Government sees $300-M earnings from 4 new oil, gas exploration deals

The government expects to earn about $300 million over the next seven years from four new service contracts (SC) on oil and gas exploration to be awarded soon under the second Public Contracting Round (PCR), a ranking energy official said.

Energy Undersecretary Guillermo Balce said they would award next month four exploration blocks to Burgundy Global Asset Management Corp., PNOC-Exploration Corp. (PNOC-EC)/ Nido Petroleum Philippines Ltd., and Ranhill Berhad of Malaysia.

Balce said the West Palawan block will be awarded to the consortium of PNOC-EC and Australia’s Nido Petroleum. Two exploration blocks in East Palawan, on the other hand, were won by Filipino-owned Burgundy and other partners, while the South Eastern Palawan (Tawi-tawi block) will be awarded to Ranhill.

The energy official said Nido Petroleum, which is partly-owned by Ranhill, will need to secure approval from the Office of the President since it will involve more than 60 percent foreign participation.

"We are preparing for the awarding of the contracts. Probably we can award them by July this year," Balce said.

In the first seven years of the contract, it is expected that each exploration firm/group would spend about $70 million to $75 million — or a minimum of $10 million each well — and about $5 million will be used for other costs like geological studies and training.

The investments exclude capital that would come in if the exploration proves to be of commercial value. "This is the minimum investment we can get. The companies are expected to extend the contract to 25 years and invest more if they will find oil, gas in their respective areas of exploration," Balce said.

He said after the awarding of these contracts, the Department of Energy (DOE) will undertake another PCR within the third quarter of this year.

"We will conduct another PCR for oil and gas, coal, and geothermal exploration blocks within July, September and October. And then we will close it on December," he said.

He said they expect to open five to six more exploration blocks for oil and gas and nine blocks each for geothermal and coal.

The four petroleum contract areas cover a total of 49,789 square kilometers in shallow to deep waters.

The Philippine government has embarked on an aggressive development of the country’s energy resources through improved contracting and bidding schemes and enhanced fiscal incentives in pursuit of its quest to increase the country’s energy self-sufficiency.

In 2003, the DOE launched PCR-1 wherein exploration blocks near oil producing areas in Northwest Palawan and in vast frontier basins in Southwest and East Palawan, Sulu Sea and Reed Bank were offered for investors. Two blocks were awarded to BHP Billiton Petroleum under Service Contract 56.

Since December 2004, 16 petroleum exploration service contracts have been awarded with minimum financial resources amounting to $215.31 million committed to the proposed work program.

Continuing the gains of PCR-1, the DOE in August. 2005 conducted the Philippine Energy Contracting Round (PECR) wherein it offered investors opportunities for exploration and development not only of petroleum resources but also exploration and development of coal and geothermal resources.

Seven areas were offered for exploration, development and production of the country’s coal resources while 11 areas were offered for geothermal exploration, development and/or direct utilization for power generation use and other geothermal applications.