As the 12th most populous nation in the world, the Philippines is grappling with an uncontrollable energy thirst – common among emerging economies – amid brisk rural-urban migration.
The Philippines will to be home to some 101.2 million people by 2014, up 5.4 million from 2011, according to the country’s Commission on Population. The country has a median age of 22.2, and the United Nations has predicted that the working-age population will start becoming particularly prominent in 2015.
With an expected growth rate of around 2 percent per annum, it comes as no surprise to industry watchers that the Philippines has started focusing on developing its petroleum sector. The Philippine Department of Energy (DOE) said it aims to make the country 60 percent self-sufficient in energy by 2024 in a 2011 public address.
In the same year that the DOE committed to raise the country’s energy self-sufficiency, the agency launched its largest ever petroleum block contracting round. The fourth Philippine Energy Contracting Round (PERC 4), which was launched June 30, 2011 saw 15 oil blocks – 12 offshore and three onshore – spanning an area of more than 25.5 million acres (10 million hectares) being offered.
The contract areas cover hydrocarbon prolific areas within the basins of the Northwest Palawan, East Palawan, Sulu Sea, Mindoro-Cuyo, Cagayan, Central Luzon and Cotabato.
Present Day Oil Output
The country has 27 active service contracts (SC) for oil, according to the DOE. Production is dominated mostly by state-backed Philippine National Oil Company (PNOC) and several large international operators such as Exxon Mobil Corp., Shell Philippines Exploration B.v., Nido Petroleum Ltd., BHP Billiton Petroleum and Galoc Production Company.
The Philippines produced some 1.64 million barrels of oil in 2012, a remarkable achievement considering that the country produced no oil before 2000, according to the DOE. The Galoc field, sited 37 miles (60 kilometers) northwest of Palawan Island, accounted for 1.5 million barrels. The Nido oil field is the second largest producing field, followed by the Matinloc and North Matinloc oil fields.
“Although [the country’s] current production of crude oil is quite modest, the Philippine petroleum industry may have significant potential in the disputed area of the South China Sea Basin, which is adjacent to the Northwest Palawan Basin,” according to an August 2012 report published by the International Monetary Fund.
Expediting Offshore Exploration
With the Philippines government showing a renewed commitment to expediting exploration activity, several companies have responded by ramping up efforts on the exploration and surveying fronts.
Manila moved to challenge China’s claim to most of the South China Sea/West Philippine Sea at a Jan. 23 United Nations tribunal.
“This afternoon, the Philippines has taken the step of bringing China before an arbitral tribunal under the 1982 United Nations Convention on the Law of the Sea (UNCLOS) in order to achieve a peaceful and durable solution over the West Philippine Sea,” the Philippines Department of Foreign Affairs (DFA) said in a public statement issued the same day.
Several days later, Forum Energy Philippines disclosed that it secured a two-year extension from the DOE to drill two appraisal wells in an offshore petroleum license, SC72, located in territory claimed by China in the South China Sea.
SC72 is sited west of the Palawan Island in the South China Sea, spanning 3,398 square miles (8,800 square kilometers). Results from a 248-square mile (96-square kilometer) 3D seismic survey of the license indicated a mean volume of 3.4 trillion cubic feet of gas-in-place with significant upside, Forum revealed in its 2011 earnings report.
The company plans to start on its second sub-phase work program on SC72, which involves the drilling of two appraisal wells.
Beyond the SC72 acreage, other oil and gas blocks around the Reed Bank are also manifesting probabilities of rich recoverable reserves, the DOE said in a separate 2011 report.
Meanwhile, Nido Petroleum confirmed in a Dec. 19, 2012 statement that it will be drilling in SC63 and SC58 in the North West Palawan Basin. Nido plans to start drilling SC63 by November this year. Industry watchers are expecting the company to announce its drilling program soon.
The block offers numerous drill-ready prospects with multiple potential plays that include the Apribada and Biniray West prospects with 63 and 236 million barrels of oil respectively. The prospects have a gross mean prospective resource of 1.8 trillion cubic feet of gas.
Nido already has an inventory of drill-ready prospects and leads defined on 3D seismic with a drill commitment by January 2014 for SC58. The SC58 holds great potential, given its position as a deepwater block adjacent to the giant Malampaya gas field operated by Shell, Edison Investment Research noted in a December report.
New Blocks Show Great Potential
Of the new blocks being offered during PERC 4, there is significant optimism surrounding the East Palawan blocks, also known as areas 10, 11, 13 and 14. Each area could contain gross mean prospective resources of 116 million barrels and 279 billion cubic feet of gas in place, according to the DOE. These blocks border on Borneo and share similar geological characteristics with existing Malaysian fields.
With such optimistic oil and gas reserve figures being made public, the area has since received considerable attention from China – a country which is as eager as the Philippines muscles in on new offshore petroleum opportunities.
“I believe there is a lot more oil and gas in the Philippines given the country’s proximity to other producers in the Asia Pacific such as Indonesia and Australia,” PNOC’s CEO Antonio Cailao said in a statement made to Reuters last year.
“The Philippines sits in the middle of the Asia Pacific region, surrounded by countries with substantial oil and gas assets, yet the Philippines has very low proven reserves. This either means the country is extremely unlucky or it has not yet begun to scratch the surface in terms of exploring its hydrocarbons potential,” Cailao later told the Oxford Business Group.