DOE willing to extend exploration period in Recto Bank beyond '13

MANILA, Philippines - The Department of Energy (DOE) is willing to extend the exploration period in resource-rich Recto Bank off Western Palawan beyond 2013, a top energy official said.

DOE undersecretary Jose Layug Jr. said one of the possible grounds for the extension is force majeure.

The development came after project proponent Philex Petroleum Corp.’s announcement last week that the exploration might be delayed given an ongoing territorial dispute between the Philippines and China.

Layug added that an escalation in the territorial spat will qualify as a force majeure or an event beyond the control of the exploration firm.

Exploration of the Recto Bank or Service Contract (SC) 72, which is near the contested Spratlys, is being conducted by Forum Energy Plc., a UK-based oil and gas firm controlled by Philex Petroleum.

“There is always the possibility of a delay because of the political concerns between Philippines and China,” said Philex Petroleum chairman Manuel V. Pangilinan.

“We would have to seek (the DOE’s)forbearance if there is a delay in the work program,” he said.

Forum Energy said it needs around $75 million to continue with its drilling program for the Recto Bank, which showed a potential of producing 16.6 trillion cubic feet of gas. The estimated resources are way above the 3.4 trillion cubic feet of gas in the Malampaya natural gas project in Palawan.

But Chinese firms can still participate in the exploration through a partnership with Philex Petroleum.

“There is no problem. They can always farm-in as long as they comply with Philippine laws,” Layug said.

For Pangilinan, Philex Petroleum is in talks with foreign firms for the development of the contract area. The company is even willing to partner with a Chinese firm that might ease the territorial spat.

“We would like to stick to the work program and the schedules...we would like to be able to build the resources as soon as practicable,” Pangilinan said.

Philex Petroleum, which listed in the local bourse by way of introduction last September, is the subsidiary of Philippines’ largest miner Philex Mining Corp.

The 8,800-square kilometer SC 72 covers the Sampaguita natural gas discovery. Between 1976 to 1985, seven wells were drilled in the area confirming resources.

However, Layug said there was no market for such products back then but presently, natural gas is an alternative to oil.

“We do have a lot of potential resources in the Philippines and that is what we will look for,” Layug said.