Petilla threatens to cancel drill contract of Cinco-1

MANILA, Philippines - Energy Secretary Carlos Jericho Petilla has threatened to cancel Service Contract (SC) 55 after its proponents failed to submit a concrete drilling plan for the Cinco-1 well in offshore Palawan.

The SC 55 proponents include BHP Billiton, Otto Energy, Trans-Asia Oil and Development Corp. and Energy Development Corp.

BHP Billiton, an Australia-based oil and mining firm, earlier withdrew its participation in the Cinco-1 oil and gas project.

Cinco-1 is believed to have potential gas reserves, being located near the Malampaya natural gas field in Northwest Palawan, the biggest natural gas find in the Philippines.

“If Otto Energy does not find a drilling partner then I’ll just have to cancel it.  Unless they ask for an extension because they are still interested to drill it then we will extend it. Otherwise, if there is no chance for them to drill it then might as well cancel the contract,” Petila said.

The energy chief said the DOE had been informed that BHP Billiton might have been experiencing some financial difficulties, thus the decision to pull out of the SC 55 drilling project.

“Their budget was cut by 35 percent. Not only in the Philippines but even in India they decided to cancel their participation in another contract. I think Otto Energy might file legal actions because BHP Billiton has contractual obligations,” he said.

Petilla, however, pointed out that should the remaining members of the consortium opt to continue with the project, the DOE will be willing to  extend the contract.

“I will not extend it if there is no clear indication that they will pursue the drilling,” he said.

The DOE chief said the consortium should be able to submit a definite Cinco-1 well drilling program.

“Our requirement is for them to show that they have contracted a drilling rig. I don’t know under the circumstances if Otto can produce that.  I’m just asking what’s their plan,” he said.

Petilla said they have already sounded off their warning to the SC 55 consortium and it’s up to them to comply.

“I didn’t give a timetable as to when they should reply. If they are interested, they won’t wait for any timetable,” he added.