Galoc consortium to pursue $188-M expansion

MANILA, Philippines - The consortium behind the Galoc project in offshore Palawan, the only oil-producing field in the country, will pursue a $188-million expansion to more than double its output to 12,000 barrels of oil per day (bopd), officials said.

In disclosures to the Australian Stock Exchange, Nido Petroleum Ltd. and Otto Energy Ltd. announced that the consortium has approved the final investment decision for the Phase 2 development of the Galoc oil field in the Northwest Palawan basin.

“The total project cost represents capital expenditure of $188 million, with Otto funding $62 million based on its 33-percent working interest,” Otto said.

Nido Petroleum, which holds a 22.88-percent share in the Galoc oil field or Service Contract (SC) 14 Block C1 , said it will spend $43 million for the expansion.

“The development is projected to increase field production from 5,600 bopd to more than 12,000 bopd,” the firms said, adding that first oil output under the expansion is expected in the second half next year.

Remaining recoverable volumes of the Galoc oil field is estimated at 8.9 million barrels on a proven basis and 13.4 million barrels on a proven and probable basis, both figures up by 156 percent and 134 percent, respectively, from previous data.

Galoc lies within SC 14 in 300 meters of deep water, some 60 kilometers offshore Palawan. The Galoc reservoir lies 2,200 meters below the sea floor, with its first production on Oct. 9, 2008.

Specifically, the phase 2 development includes the drilling of two subsea wells, tied back to the existing floating production, storage and offloading (FPSO) facility.

Galoc’s operations stopped in December as the project operator installed the FPSO. It resumed production in April.

“The Galoc Phase 2 development delivers incremental reserves and extends the field life, and as such, it is a key element of our strategy to maximise value from our producing and development assets in the near term,” said Nido’s managing director Phil Byrne.

“Galoc Phase 2 represents a low risk, near term opportunity for Otto to extend the field life of its cornerstone producing asset, as well as deliver incremental reserves and improve production reliability,” said Otto CEO Gregor McNab.

Other members of the consortium are Galoc Production Co. (26.84 percent), Oriental Petroleum and Minerals Corp. (7.79 percent); The Philodrill Corp. (7.21 percent) and UK firm Forum Energy Philippines Corp. (2.28 percent).

Meanwhile, Otto said it acquired a majority stake in an oil and gas field in SC 51 in Eastern Visayas.

“Otto has purchased a 40-percent working interest in SC 51 North Block from Swan Oil & Gas Ltd. for A$1.25 million,” the company said.

Otto said the purchase doubled its stake in the onshore field in Leyte province to 80 percent.

The 332,000-hectare SC 51 comprises two areas, onshore Northwest Leyte in the north and the islands of Cebu and Bohol in the south.

McNab said the Galoc Phase 2 and the SC 51 acquisition moves are in line with Otto’s strategy of building an integrated petroleum company focusing on Southeast Asia and onshore East Africa.

The government, for its part, is encouraging investors to look at prospects in the Philippines.

Compared with its peers in the region, the country’s upstream oil and gas industry is relatively small.

This has been generally attributed to the high cost of development along deep seas and the quality of reserves that have been discovered.

The Philippines produces only 6,000 bopd, way below the demand of around 300,000 bopd.