EXPLORATION OF OIL IN THE PHILIPPINES. INCLUDING PANATAG SHOAL!! and BENHAM RISE!!

BENHAM RISE

BEFORE READING THIS!! CLICK HERE:  “THE LEASE OF NORTH BORNEO/BORNEO PHILIPPINES”.

SPRATLY ISLANDS IS UNDER THE TERRITORY OF PHILIPPINES!!!

 

125 BILLION BARILES NG LANGIS SA SPRATLY ISLANDS.

SOURCE: http://www.abante.com.ph/issue/jul1011/news07.htm

Oil exploration in RP active, shows promise
By Jesus F. Llanto, abs-cbnN EWS.com, Newsbreak
Posted at 10/07/2008 5:40 PM | Updated as of 10/07/2008 6:17 PM
SOURCE OF THIS ARTICLE

It may come as a surprise that the Philippines has substantial oil reserves. But the growing number of oil exploration activities in select parts of the country attests to promising finds.

In 2005, the Department of Energy estimated that the Philippines had a total of 456 million barrels of fuel oil. The volume consists of 54 million barrels of condensate, 2,135 billion cubic feet of gas and 25 million barrels of oil.

“These petroleum reserves calculations are based on the 16 sedimentary basins situated all over the country from the Cagayan Valley Basin in the north down to the Agusan-Davao Basin in the south as well as the prolific Northwest Palawan Basin and the Sulu Sea Basin along the western flank of the archipelago,” the DOE said.

Vietnam has 600 million barrels of oil reserves as of 2007, according to the Oil and Gas Journal. Thailand has 290 million barrels of proven oil reserves. Malaysia has 3.0 bilion barrels of proven oil reserves.

This promise of the potential petroleum reserves in the Philippines , together with the recent surges in oil prices, has attracted a number of oil exploration companies to the country. The government has awarded these companies service contracts to explore areas identified as having potential petroleum reserves.

Based on news reports and a list of petroleum service contracts obtained by abs-cbnNEWS.com/Newsbreak from the energy department, there are 33 active petroleum service contracts awarded to oil and gas exploration companies as of the end of September 2008. (Click here to see list)

“Exploration activity in the Philippines has recovered to levels last seen in the mid-1970s,” the United States Energy Information Administration said in its latest country analysis of the Philippines.

It was in the 1970s when the Cadlao and Nido oil fields were discovered and when the country produced as much as 20% of its fuel requirement.

Almost half of the service contracts cover areas near or within the province of Palawan. The 15 service contracts within the Palawan cover an area measuring about 11.85 million hectares. Three service contracts, meanwhile, cover 2.9 million hectares of area in the Sulu Sea while four service contracts in the Cagayan Basin cover an area measuring 1.74 million hectares. (Click here to see map.)

Despite the presence of large areas for exploration, discovery rates in these areas remain low compared to other countries. According to Eduardo Hernandez, president of the Petroleum Association of the Philippines, discovery rates in Northwestern Palawan and Sulu Sea reached 47% and 12%, respectively. Discovery rate in Cagayan Valley was 13% while in Southwestern Palawan it was 10%. In contrast, Vietnam’s discovery rate has increased from 30% in 1989 to 80% in 2001.

Companies and contracts

Three exploration companies have been awarded four service contracts each: NorAsian Energy Ltd, Burgundy Global Exploration Corp (BGEC), and the state-owned Philippine National Oil Co.—Exploration Corp. (PNOC-EC)

Norasian Energy Ltd., a subsidiary of the Australian-based Otto Energy, was awarded four service contracts (SC): SC 50, which covers 128,000 hectares in Northwestern Palawan; SC 51, which covers 332,000 hectares in Eastern Visayas, SC 55 covering 900,000 hectares in West Palawan and SC 69 covering 704,000 hectares in the Visayan Basin . Norasian also has 18% indirect interest in the Galoc oil field in Northwestern Palawan .
Burgundy Global Exploration Corp., a member of the Burgundy Group of Companies that has also business interests in hotels, real estate and property development and techno-industrial estate, has also been awarded four service contracts: SC 61 covering 1.3 million hectares in northeastern Palawan; SC 62 covering 1.3 million hectares in southeastern Palawan; SC 67 covering 648 million hectares in eastern Palawan and SC 68 covering 983,000 hectares in eastern Palawan.

State-owned PNOC-EC has also been awarded four service contracts: SC 37, which covers 36,000 hectares in the Cagayan Basin ; SC 47 covering 1.466 million hectares in offshore Mindoro; SC 59, which covers 1.47 million hectares in West Balabac in southwestern Palawan; and SC 63 covering 1 million hectares in southwestern Palawan .

Apart from these service contracts, PNOC is also the only Filipino partner in Malampaya Deep Water Gas-to-Power Project—or SC 38 that covers Palawan—which was formally inaugurated in 2001. Other partners in the project are Shell Philippines Exploration B.V. and Chevron Texaco. PNOC-EC also owned 15% stake in the concession that was awarded SC 43, which covers portions of the Ragay Gulf in the Bicol Region.

Triggered by oil prices

Eduardo Hernandez, a director at PNOC-EC, said the current interest in exploration was triggered by the increase in the oil prices from US$40 to US$100.

Oil exploration in the country, however, has a long history and it dates back to 1896. Data from the energy department showed that the first exploration occurred when Smith, Bell and Co. drilled in Cebu .

Widespread exploration occurred only between 1950s to 1970s. In 1973, the contract system was introduced after the signing of the Oil Exploration and Development Act of 1972, or Presidential Decree No. 87. The decree granted exploration companies incentives like exemption from all taxes and duties for importation of materials and equipment to be used for petroleum explorations, and exemption from all taxes except income tax.

Despite the fact that oil exploration in the Philippines started even before the 1900s, neighboring countries have drilled more wells than the country.

“Our country remains largely an unexplored or virgin country for oil explorers,” Hernandez said adding that, in the Philippines, only 557 wells have been drilled over a hundred years while Indonesia drilled 400 wells a year in the 1980s. “Our record of oil drilling in 100 years is close to Indonesia ’s record in one year.”

Risky venture

Oil production and exploration, says Hernandez, is capital intensive. Hernandez said most local exploration companies cannot undertake drilling on their own and foreign corporations have to shoulder about 85% of the cost. “Cost could be from US$25 million to US$50 million.”

Exploration is a risky investment since a company must drill first to know if there is oil. Indeed, not all exploration yielded positive results. Last May 13, Japan Petroleum Exploration Co. Ltd (JapEx) announced that its subsidiary Japex Philippines decided to abandon SC 46 block in Tañon Strait after it was not able to discover oil and gas in the 2,580 sq. km site even if it has already drilled one exploration well.

During the same month, Malaysian oil firm Petronas also pulled out after it failed to find significant petroleum reserves in offshore Mindoro . Reports said Petronas and other members of the consortium had spent US$23 million for drilling in its service contract area.

“We have been looking for oil with little success,” said Hernandez. “Not because the prospect of finding is not significant but because we have not drilled enough wells to prove that our country has major reserves.”

Exploration companies that want to drill oil have also faced opposition from environmentalists and from fisher folk. Japex and Norasian, for instance, met strong opposition from fishermen’s groups who claimed that their drilling activities might scare away the fish and would destroy marine life.

These, however, have not stopped companies from venturing into oil exploration and participating in the Philippine Energy Contracting Round (PECR), an annual activity initiated by the energy department where exploration blocks are offered to companies for bidding for exploration, drilling and production..–with reports from Gemma Bagayaua-Mendoza

Service Contract No.

COMPANIES

LOCATION

AREAS

1

6

The PHILODRILL Corp/ Oriental

NW Palawan

164,837.72

2

14

The PHILODRILL Corp.

NW Palawan

70,887.56

3

37

Philippine National Oil Co.-EC

Cagayan Basin

36,000.00

4

38

Shell Philippines Exploration B.V.

Palawan

158,526.00

5

40

FORUM Energy Philippines Corp.

N. Cebu

458,000.00

6

41

TAP (Philippines) Pty. Ltd

Sulu Sea

832, 386.00

7

43

Pearl Oil Ltd.

Ragay Gulf

806,550.00

8

44

Gas2Grid Pte. Ltd.

Central Cebu

75,000.00

9

45

South Sea Petroluem Holdings Inc.

Agusan-Davao

560,000.00

10

47

Philippine National Oil Co.—EC

Offshore Mindoro

1,466,700.00

11

48

Aragorn Power and Energy Corp.

Cagayan

748,000.00

12

49

RANHILL BHD

Southern Cebu

265,000.00

13

50

NORASIAN Energy Ltd.

NW Palawan

128,000.00

14

51

NORASIAN Energy Ltd.

East Visayas

332,000.00

15

52

E.F Durkee & Associates , Inc.

Cagayan

96,000.00

16

53

Pitkin Petroleum Ltd.

Onshore Mindanao

660,000.00

17

54

Nido Petroleum Philippines Pty. Ltd.

West Calamian, NW Palawan

537,616.15

18

55

NORASIAN Enegry Ltd.

West Palawan

900,000.00

19

56

MITRA Energy Ltd.

Sulu Area

862,000.00

20

57

CNOOC Int’l Ltd/

North Calamian, NW Palawan

720,000.00

21

58

Nido Petroleum Philippines Pty. Ltd.

West Calamian, NW Palawan

1,344,000.00

22

59

Philippine Nat’l Oil Co.–EC

West Balabac, SW Palawan

1,476,000.00

23

60

SHELL Philippines Exploration B.V.

NE. Palawan

1,008,000.00

24

61

Burgundy Global Exploration Corp.

NE Palawan

1,356,000.00

25

62

Burgundy Global Exploration Corp.

SE Palawan

1,302,000.00

26

63

PNOC-EC-Nido Pet. Philippines

SW Palawan

1,056,000.00

27

64

RANHILL BHD

Sulu Sea

1,254.940.00

28

65

MIOCENE Mining and Energy Corp.

Cagayan

860,00.00

29

66

Helios Petroleum and Gas Corp.

Agusan-Davao

488,000.00

30

67

Burgundy Global Exploration Corp.

East Palawan

648,000.00

31

68

Burgundy Global Exploration Corp.

East Palawan

983,900.00

32

69

Norasian Energy Philippnes Inc.

Visayan Basin

704,000.00

33

70

Polyard Petroleum International Co. Ltd.

Central Luzon Basin

684,000.00

ANOTHER NEWS!!!!!!

MANILA, Philippines – The first extraction of oil off the Galoc oilfields in Palawan signifies the Philippines’ first step toward energy self-sufficiency, the government said on Thursday.

Executive Secretary Eduardo R Ermita told reporters in Malacañang that “light medium crude oil with a potential high yield of light ends such as gasoline” was extracted 60 kilometers northwest of Palawan island at 10:45 a.m.

“The fresh extracts were put on on board a Philippine vessel en route to our local refineries at 11:20 a.m.,” Ermita said as broadcast over the radio.

The extracted Galoc oil, which will be called “Palawan Light,” is expected to address at least six percent of the country’s daily requirement of 300,000 barrels.

“We embrace this significant development as this will help immensely in our pursuit to be energy self-sufficient,” Energy Secretary Angelo T Reyes said

The Galoc site, which has a reservoir located 2,200 meters below the sea floor, is expected to yield 17,000 to 20,000 barrels of oil per day in the next three months.

The Galoc oilfield was discovered in 1981 but site developments were done only in 2005 when Galoc Production Company WLL farmed in to the area. Its partners include Otto Energy, Philodrill Corp. and Nido Petroleum Ltd.

Estimates made in 2006 showed that Galoc has reserves of about 10 million to 20 million barrels of oil.

Ermita said that further studies and exploration of the site could result in additional yields.

“The President is optimistic that this new development will positively impact on the administration’s efforts to reduce the country’s annual oil importation of US$6 billion, and, in turn, also contain the increasing cost of food and other commodities,” Ermita said.

The successful oil extraction came after inclement weather disrupted site operations and even prompted operators to send in a new support vessel suited for rough seas. – with Mark Merueñas, GMANews.TV

CLICK HERE FOR THE SOURCE

ANOTHER NEWS!!!!!!!

Offshore Palawan area seen to contain 5B barrels!

By Amy R. Remo
Philippine Daily Inquirer
First Posted 22:15:00 12/03/2010

Filed Under: Oil & Gas – Upstream activities

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In a regulatory filing, Nido Petroleum explained that based on the final results of the detailed geochemical analysis conducted earlier this year, the traces of liquid hydrocarbons detected in the cores have been derived from mature oil- and gas-prone source rocks similar to the nearby Malampaya field.

The liquid hydrocarbons were also found to be of a similar composition to those which are interpreted to have generated the hydrocarbons discovered in the shallower waters of the Northwest Palawan continental region.

“Geochemical confirmation of the composition and origin of the micro-seeped hydrocarbons detected in the cores significantly mitigates what Nido considers to be the key subsurface risk in deepwater SC 58 block–evidence of an active source system,” said Jon Pattillo, head of exploration at Nido.

“In a similar way to the Malampaya [structure] being the likely source for the majority of oil and gas
discoveries in-board of SC 58, including the giant Malampaya gas field, equivalent-aged [structures] mapped in SC 58 can now be considered as viable source systems to charge the large Balyena, Butanding and Dorado prospects mapped in the block. This is a very exciting development. Not only are individual prospect probability of success (POS) improved, but it highlights the substantial upside in the SC 58 deepwater fairway,” Pattillo explained.

Nido Petroleum holds a 50-percent stake in the SC 58 license, while PNOC-Exploration Corp., the upstream and coal arm of the state-owned Philippine National Oil Co., holds the remaining half.

According to Nido, its forward exploration program
in SC 58 would now focus on full integration of geochemical results with ongoing seismic reprocessing studies aimed at detailing the extent of the source rock systems within the block.

“This work will conclude in early 2011 following final risking/ranking of the prospect inventory and the selection of drilling candidates,” the company added.

Nido Petroleum is currently the dominant player in the Palawan Basin across all water depths from the shallow water areas that include its two producing oil fields at Galoc and Tindalo, mid-water depth that holds the Gindara drilling target, through to the deep water area of SC 58 and SC 63 where a host of leads and prospects have been identified.

CLICK HERE FOR THE SOURCE

No TO OIL DRILLING IN NORTH WEST PALAWAN!!!

‘Malampaya case affects other oil fields, Spratlys claim’

Limiting Palawan’s jurisdiction isn’t just about who gets control of US$10 biilion in revenues

The position of the national government that the Malampaya natural gas project is outside the territory of Palawan province has implications more far-reaching than cornering the entire US$8.1 billion to $10 billion expected revenues from the reservoir, experts say.

Should the court decide in favor of Malacañang, Palawan will lose its entitlement to multi-billion-dollar earnings not just from Malampaya but from 2 other commercially viable oil fields in its waters, Galoc and Nido-Matinloc.

side from these, there are more than a dozen other explorations in the waters around mainland Palawan for potential oil and gas deposits. In other parts of the country, 19 other explorations are being conducted, although most of them are inland.

Legal experts also say that if the national government will not recognize Palawan’s jurisdiction over Malampaya, it will weaken the country’s territorial claim on the Spratlys islands in the South China Sea.

Effectively shrinking Palawan’s territory will place the Philippine farther from the Spratlys; currently, it is the claimant country nearest the oil-rich group of islands.

The case filed by the provincial government of Palawan against the national government, to invoke its right to get legally mandated 40% of the gross revenues from the Malampaya project, has reached the Supreme Court. Another case questioning the legality of an interim agreement between the Palace and Palawan, which reduces to 20% the province’s share, has been consolidated with the first case. Oral arguments were heard on Tuesday.

41 million barrels

The Malampaya reservoir is estimated to have recoverable reserves of 2.7 trillion cubic feet of natural gas reserves and 85 million barrels of condensate. While operational since 2001, it is expected to produce oil in 2010, estimated to reach as much 41 million barrels, according to the US Energy Information Administration website.(Current world market prices peg a barrel of oil at $70).

The project is operated by a consortium composed of Shell Philippines (45%) and Chevron-Texaco (45%). The government has a 10% stake in the project through the Philippine National Oil Company-Exploration Corporation (PNOC-EC), the oil and gas subsidiary of the state-owned PNOC.

The national government expects revenues of $8.1 billion to $10 billion from the project. Of this amount, Palawan is claiming a share of $2.1 billion, citing a provision in the Constitution that the locality where natural wealth is exploited and developed is entitled to a just share in the revenues from the undertaking. The Local Government Code sets the local government units’ share at 40% of gross revenues.

alawan’s jurisdiction over Malampaya and the 60-40 revenue sharing scheme between the national and local governments have been acknowledged by past presidents. President Arroyo acknowledged these, too, early in term. She changed her mind when the commercial operations of the project started in October 2001 and she was told of the estimated earnings.

The national government contends that Palawan’s jurisdiction ends 15 kilometers into its municipal waters. Since Malampaya is located 80 kilometers from the shore of El Nido town, the Palace says, it is therefore outside the province’s territory.

“Beyond this limit, the authority and jurisdiction to enforce the laws of the Philippines rests with the National Government through the Philippine Navy, Philippine Coast Guard, Philippine National Police-Maritime Command, and the Department of Agricultutre,” the national government’s petition for review filed in February 2006 reads.

Highest concentration

Local officials are worried that the result of the legal battle over Malampaya would also affect the sharing scheme from the revenues of other petroleum production activities in Palawan.

In fact, a court decision upholding the national government’s claim of jurisdiction over Malampaya would affect the 13 other explorations, and therefore potential commercial projects, around mainland Palawan.

The bodies of water surrounding Palawan are host to commercial oil and natural gas fields that comprise a huge chunk of the petroleum reserves of the Philippines.

“The Philippines is surrounded by oil-rich basins of Indonesia, Sabah, and China,” an energy industry expert, who asked not to named, told Newsbreak. The area around Palawan, he said, has high potential for oil discovery.

A list of service contracts from the oil and gas division of the energy department showed that of the 34 service contracts for oil exploration as of March 2009, 15 are surrounding mainland Palawan.(See the list and map of petroleum service contracts as of March 25, 2009.)

Most of our discoveries are in Palawan, especially in the northwest portion of Palawan where Malampaya is,” energy undersecretary Ramon Allan Oca told Newsbreak, adding that the province’s geology is similar to its oil-rich neighbors Malaysia and Indonesia.

The northwestern side of Palawan alone, the industry expert told Newsbreak, has a discovery rate of 47%, which is higher than in other parts of the country. In Southwestern Palawan, it’s 28%; Southeastern Luzon, 20%; Cagayan Valley 18%; Sulu Sea, 12%; and the Visayan Basin, 9%.

Galoc proceeds

The northwestern portion of Palawan is also the area where two other wells are located, Galuc and the Nido-Matinloc.(See the map showing location of Malampaya, Galoc and Nido-Matinloc.)

Galoc, an oil field where operations started in October 2008, is said to have a potential oil reserve of 10 billion barrels. On its first 90 days, it produced 20,000 barrels a day, which is equivalent to 6% of the daily demand for oil.

Like Malampaya, it is on northwestern Palawan. Located 70 kilometers west of Culion Island, Galoc, like Malampaya, is beyond the 15-kilometer municipal waters where the province has jurisdiction, according to Malacañang’s definition.

Definite proceeds from the Nido-Matincloc operations are difficult to estimate it because production there is cyclical—there are periods that there are no production.

This early, Palawan Vice Governor David Ponce de Leon expressed concern that an unfavorable decision on the Malampaya case will affect their claim on the shares from the Galoc oil field, which is located about the same distance as Malampaya.

The decision may eventually force a review of the Palawan government’s revenue share from the oil production in West Linapacan.

The West Linapacan oil fields are also outside the 15-kilometer municipal waters of the province, but Palawan received P116 million from their operations from 1992 to 1998.(See the certification showing amount of oil revenues received by Palawan from 1992-1998.)

The amount, as certified by the provincial treasurer, represented Palawan’s 40% share in the oil revenues from West Linapacan oil fields.

Discovered in 1991 by Alcorn Petroleum, the West Linapacan field was producing 17,000 barrels of oil per day (BOPD) and produced a total of 6 million barrels of oil when its operation was suspended in January 1996.

LGU authority

Governance experts are of the opinion that the authority of the local government units on the Malampaya project has been established.

Local officials said that when the Malampaya project was still on its initial stage, the contractors or operators sought the endorsements of the municipal government of El Nido and the provincial government of Palawan.

Antonio La Vina, dean of the Ateneo School of Government and former environment undersecretary, told Newsbreak that local governments usually give endorsements to obtain the environmental impact assessment of the project.

“I do not think it has ever been an issue to the operator that local governments had jurisdiction,” La Vina said in an e-mail interview.

When the case was being heard at Regional Trial Court in Palawan, local officials presented the environmental compliance certificate of the project to prove that it is located northwest of Palawan, and a declaration from the provincial assessor to show that the project is subject to the taxing powers of provincial government.

Alex Brilantes, dean of the University of the Philippines National Center for Public Administration and Governance, said that these permits and endorsements from Palawan showed that the local government exercise jurisdiction on the project.

“These are recognitions of the authority of the LGU on such resources,” Brillantes told Newsbreak.

El Nido Mayor Leonor Corral told Newsbreak that all activities of the project pass through El Nido and that their municipality is the host of the Joint Task Force Malampaya, which safeguards the project.

“The lot where the task force is headquartered was given by the municipality,” Corral said.

Lawyer Harry Roque, one of those questioning the interim revenue-sharing agreement between Palace and Palawan, said that the “local versus national territory” issue should not be raised om the first place because the Philippines is a unitary and not a federal state.

“Everything is national jurisdiction except that there is constitutional provision and a legislative policy which allocates 40 percent of gross [revenues] to local government units,” Roque said, referring to the Local Government Code provision.

“In case that a crime happens there (Malampaya project), who will prosecute? It’s the regional trial court in Palawan. In case of tax on concession agreements that has a local tax, who will collect? It’s the municipality in Palawan,” Roque said.

Distance to Spratlys

Aside from the impact of the Malampaya case on the revenue-sharing scheme between the national and local governments, it may either weaken or boost the Philippine claim on the Spratlys, a chain of islands believed to be rich in petroleum resources.

The Philippines is one of the claimant countries to the Spratlys, which has oil deposits ranging from 2 billion to 200 billion barrels, according to various estimates by local and foreign scientists and engineers.

The country, aside from being nearest the contested islands, has initial geologic evidence that its continental shelf in Palawan was once connected to the Spratlys.

Should the Philippines get its hands on the Spratlys oil reserves, it can cover its petroleum requirements for 15 to 215 years.(Read “Making A Claim.”)

However, says Roque, who is an expert in international law, if the national government will say that Malampaya, which is approximately 80 kilometers from the coast of mainland Palawan, is not part of the province, it’s effectively placing the territory farther from the Spratlys.

Palawan Governor Joel Reyes told Newsbreak that saying that Malampaya is not part of Palawan is tantamount to saying that Kalayaan Islands Group (the local name of the Spratlys) is also not part of their province.

“Our last municipality is Kalayaan and Malampaya is nearer to mainland Palawan. If you say that Malampaya exploration is outside Palawan, it’s like saying that Kalayaan is not part of the Philippines,” Reyes said.

Kalayaan became a municipality of Palawan on June 15, 1978 by virtue of former President Ferdinand Marcos Decree No. 1596.

Palawan Vice Governor David Ponce de Leon, a lawyer, told Newsbreak that the fact that Malampaya is nearer to mainland Palawan than Kalayaan is strong proof that they have jurisdiction over the project.

“If Kalayaan, which is 300 kilometers from Palawan is part of the province, how can this 80-kilometer [far] natural gas project be not within Palawan?” he said.- Newsbreak

ENERGY PROFILE OF THE PHILIPPINES!

Introduction
Map of the Philippines. (Source: EIA)
Map of the Philippines. (Source: EIA)

Under the leadership of President Gloria Macapagal Arroyo, the Philippines has undergone an economic transformation, deregulating its energy sector and offering new incentives for foreign investment. President Arroyo came into power when former President Joseph Estrada was forced to resign in 2001, and in May 2004, she was reelected to another six-year term. Her tenure has not been without controversy, however. Most recently, in February 2006, President Arroyo decided to invoke a week-long state of emergency after an apparent coup attempt. President Arroyo has also survived two impeachment attempts over alleged corruption.

Despite some political instability, the Philippines has experienced strong economic growth over the last two years. Real gross domestic product (GDP) grew at 5.0 percent in 2005, down somewhat from the 15-year high growth rate of 6.2 percent seen in 2004. The country is currently experiencing a minor cyclical downturn, driven by high global oil prices and a slowing world economy. However, growth remains strong, with the Philippine economy growing an estimated 5.5 percent during the first half of 2006. A key driver of continued economic growth is overseas workers’ remittances, which help sustain strong private consumption in the Philippines. During 2005, total remittances from approximately seven million overseas workers stood at $10.7 billion, or about 11 percent of nominal GDP.

The Philippines is one of the claimants, along with China, Taiwan, Malaysia, and Vietnam, to the Spratly Islands, located in the South China Sea. Potential oil and natural gas reserves surrounding the islands have sparked the interest of all the littoral states. In September 2004, the Chinese and Philippine governments reached an agreement to jointly pursue seismic survey work in the Spratlys, but without giving up their respective territorial claims. Vietnam joined the agreement in March 2005, and it was formalized with a memorandum of understanding between the three governments.
Oil
Oil Production and Consumption in the Philippines, 1986-2006 (Jan-Sep only). (Source: EIA International Energy Annual, Short-term Energy Outlook)
Oil Production and Consumption in the Philippines, 1986-2006 (Jan-Sep only). (Source: EIA International Energy Annual, Short-term Energy Outlook)

According to Oil and Gas Journal (OGJ), the Philippines had 138 million barrels of proven oil reserves in January 2006. The country’s oil production is limited, averaging just over 25,000 barrels per day (bbl/d) during the first nine months of 2006. Between 1996 and 2000, the Philippines had no oil production. During the last several years, production has increased primarily due to the development of new offshore deepwater oil deposits. The increased production volume is still modest, however, in relation to the country’s needs. The Energy Information Administration (EIA) estimates that the Philippines will consume 349,000 bbl/d of oil during 2006.
Sector Organization

The Philippine National Oil Company (PNOC) has historically dominated the country’s oil sector. However, market reforms beginning in 1998 aimed at deregulation of the oil industry have brought many new oil companies to the Philippines. PNOC remains the primary player in upstream oil market activities, although it frequently partners with foreign companies on its major projects. The principal government agency charged with monitoring the oil sector is the Department of Energy (DOE), which holds responsibility for issuing exploration and production licenses and ensuring compliance with relevant regulations.
Exploration and Production

Historically, the Philippines has not had significant domestic oil production. Recently, exploration and production activities in deepwater areas off the Philippines have increased the country’s domestic petroleum resources. This increase was due primarily to the development of new deep-sea oil deposits in the Malampaya Oil Rim, which are found underneath the large Malampaya natural gas field. The Malampaya project is the country’s largest oil-producing area. Other recent exploration and production activities have also focused on offshore oil prospects, and during 2005 the DOE awarded eleven Service Contracts, mostly concentrated in the Mindoro, Salawan, and Sulu Sea basins.

The Malampaya project was inaugurated in October 2001, with Shell as the operator (45 percent stake), and Chevron (45 percent) and PNOC (10 percent) as project partners. While natural gas production from the Malampaya area is significant, associated oil production in the deepwater structure has been difficult to exploit. After committing $2 billion in exploration and development costs, Shell and Chevron relinquished their right to develop the oil rim project to PNOC in 2004, citing lack of sufficient oil reserves and concerns over possible damage to the overlying natural gas-producing reservoir. In June 2006, PNOC awarded a contract to Malaysia’s Mitra Energy to develop the Malampaya Oil Rim. However, on August 10, 2006, President Gloria Macapagal-Arroyo issued executive order 556, which declared that oil exploration and production activities must occur through a strict bidding process rather than the farm-in deal that Mitra had won. A spokesman for the Philippine DOE declared in September 2006 that PNOC will open a new bidding round for the Malampaya oil rim project, which Mitra estimates put recoverable oil reserves at 35 to 40 million barrels. While Philippine authorities hope to conclude the new bidding round by year-end 2006, companies interested in the oil rim have expressed concern that the project’s oil reserves are shrinking, as continued natural gas production reduces the quantity of recoverable oil deposits.

PNOC has also engaged in exploration activities in the South China Sea, where longstanding territorial disputes among countries in the region have limited development of oil deposits. PNOC, the Chinese National Offshore Oil Corporation (CNOOC), and PetroVietnam have signed an agreement to jointly explore the Joint Marine Seismic Undertaking (JMSU) area. The companies have acquired initial seismic data, and will reportedly decide whether or not to pursue the next phase of the JMSU project after results from initial tests are released in November 2006.
Downstream/Refining

According to OGJ, the Philippines had 333,000 bbl/d of crude oil refining capacity at two facilities: Petron Corporation’s 180,000-bbl/d plant in Limay, Bataan; and Shell’s 153,000-bbl/d Tabango refinery. Petron, the Philippines’ largest oil refining and marketing company, is formerly a state-owned enterprise. Since privatization efforts began in the 1990s, PNOC and Saudi Aramco each acquired a 40 percent equity stake in the company, and the remaining 20 percent is owned by stockholders.

Oil market deregulation, beginning in 1998, continues to have a significant effect on the industry. Since deregulation started, more than 60 new firms have entered the retail oil sector in the Philippines. Petron, Shell, and Chevron remain the dominant industry players, but new entrants have increased their downstream market share from 10 percent in 2000 to 20 percent in 2005.
Natural Gas
Philippine Natural Gas Production and Consumption, 2000-2004. (Source: EIA International Energy Annual)
Philippine Natural Gas Production and Consumption, 2000-2004. (Source: EIA International Energy Annual)

OGJ reported that the Philippines had 3.9 trillion cubic feet (Tcf) of proven natural gas reserves as of January 2006, almost all of which is located in the Malampaya natural gas field. The country had no significant natural gas production until 2001. During 2004, natural gas production and consumption in the Philippines stood at 102 billion cubic feet (Bcf). Although natural gas consumption has ballooned in recent years, in 2004 natural gas supplied less than 8 percent of the Philippines’ total energy consumption.

A major impetus for changes in the country’s natural gas sector has been the Malampaya offshore natural gas field. Shell (the operator of the project, with a 45 percent stake), Chevron (45 percent), and PNOC (10 percent) have come together to form the $4.5-billion Malampaya Deepwater Gas-to-Power Project. The project is the largest natural gas development project in Philippine history, and one of the largest-ever foreign investments in the country. The Malampaya Project was officially inaugurated on October 16, 2001 and holds an estimated 3.7 Tcf of natural gas reserves. Natural gas from Malampaya is pumped via a 312-mile sub-sea pipeline to a natural gas processing facility and three power plants in Batangas with a combined generating capacity of 2,700 megawatts.

In October 2006, Forum Energy announced that a natural gas prospect at the Sampaguita field could hold up to 20 Tcf of possible natural gas reserves, based on seismic data retrieved from the Sampaguita natural gas field. The field was originally discovered in 1976, but never pursued because companies believed it to hold few reserves. Some industry analysts question the 20 Tcf figure, saying that previous exploration work at Sampaguita revealed a more likely range of 3.5 to 5 Tcf of natural gas reserves. Forum Energy plans to test drill at Sampaguita in the future, and if testing confirms substantial natural gas reserves, the company will reportedly consider a liquefied natural gas (LNG) project.
Coal
Philippines Coal Production and Consumption, 1984-2004. (Source: EIA International Energy Annual)
Philippines Coal Production and Consumption, 1984-2004. (Source: EIA International Energy Annual)

The Philippines has recoverable coal reserves of 260 million short tons (Mmst). In 2004, the country consumed 10.1 Mmst of coal, up 45 percent since 1999, while producing only 2.9 Mmst. The Philippines relies on imports for much of its coal consumption, primarily from Indonesia, China, and Australia.
Electricity

In 2004, the Philippines had total installed electricity generating capacity of 15.1 gigawatts (GW). The country produced 53.1 billion kilowatt-hours (Bkwh) of electricity in 2004, while consuming 49.4 Bkwh. Conventional thermal sources make up the largest share of Philippine electricity supply, comprising more than 65 percent of the total in 2004. However, the Philippines is also the world’s second-largest producer of geothermal energy.
Sector Organization

Philippine Electricity Generation by Source, 1984-2004. (Source: EIA International Energy Annual)
Philippine Electricity Generation by Source, 1984-2004. (Source: EIA International Energy Annual)

The Philippine Department of Energy sets overall policy goals in the energy industry, while the Energy Regulatory Commission (ERC) is charged with regulating the electricity sector. After experiencing a sever power crisis in the early 1990s, the Philippine government set out to restructure and privatize the power sector with the aim of ensuring adequate electricity supply and increasing investment in energy infrastructure. After several years of legislative debate, the Electric Power Industry Reform Act (EPIRA) of 2001 was enacted. Among other things, EPIRA set into motion the deregulation of the power industry and the breakup and eventual privatization of state-owned enterprises. EPIRA required the state-owned utility, National Power Corporation (Napocor), to break up its vertically integrated assets into separate units for electricity generation, transmission, and distribution. The Act also mandated the eventual sell-off of most of the company’s transmission and generation assets.

Napocor’s assets designated for privatization were organized into two state holding companies: the National Transmission Corporation (TransCo), which took on much of the company’s transmission assets, and the Power Sector Assets and Liabilities Management (PSALM) Corporation, which assumed control of Napocor’s power plants. Under EPIRA measures, the government was also required to sell off its equity stake in the Manila Electric Company (Meralco), the country’s largest electricity distribution company that serves the island of Luzon and the metropolitan Manila area.

The government set an initial goal of selling TransCo assets by mid-2005, but this process has been delayed as previous bidding rounds failed to yield an acceptable proposal. PSALM began selling off Napocor’s power generation assets in 2004, although the effort has also proceeded more slowly than the government had hoped. PSALM originally set a target of privatizing 70 percent of its generation assets by the end of 2005. However, a progress report dated April 2006 noted that PSALM had only sold off 14 percent of its power stations, well short of its goal.
Conventional Thermal

Conventional thermal sources of electricity generation have grown in importance, especially as the Philippine government promotes the increased usage of natural gas-fired power plants. As oil prices have risen over the last two years, the country has looked to promote the development of domestic energy sources to displace oil imports. The largest projects to come onstream in recent years are connected to the Malampaya Deepwater Gas-to-Power Project, which began commercial operations in late 2001. Natural gas from the large Malampaya field is pumped ashore to supply three combined cycle power plants totaling 2,700 megawatts (MW): the 1,000-MW Santa Rita plant, the 500-MW San Lorenzo facility, and the 1,200-MW Ilijan power station. The Ilijan power plant is owned by Napocor and operated by the Korea Electric Power Corporation (KEPCO), while the other two facilities are owned and operated by the First Gas Power Corporation.

There are various other conventional thermal power plants under construction or consideration in the Philippines, although most companies are concerned with the restructuring and sell-off of Napocor’s existing power plants rather than the construction of additional capacity. One large project that is planned is the GNPower Energy Park, currently being developed by GNPower. GNPower led the construction of the Philippines’ first large-scale IPP project with its 470-MW coal-fired facility in Quezon. The Energy Park project is being developed in the Bataan province, and envisions the eventual establishment of 1,900 MW in new generating capacity, including a 600-MW coal-fired power station, 1,200-MW natural gas-fired plant, and a 100-MW wind farm.
Geothermal
Geothermal Power Plants in the Philippines
Field Installed Capacity (MW) Field Operator Power Plant Operator(s)
Tiwi 330 CGPHI Napocor
Makban 425 CGPHI Napocor, Ormat
Tongonan I, II, III 112, 210, 386 (Total 784) PNOC Napocor, Cal Energy
Palinpinon I, II 115, 80 (Total 195) PNOC Napocor
Bacman I, II 110, 40 (Total 150) PNOC Napocor
Mindanao I, II 52, 48 (Total 100) PNOC Oxbow, Marubeni
Source: Philippines Department of Energy

The Philippines is the second-largest producer of geothermal energy in the world behind the United States, with more than 1,900 MW of installed geothermal capacity. The government has set a goal of increasing this figure to 3,100 MW within a decade, which would make the Philippines the largest geothermal energy producer, surpassing the United States. Most geothermal power projects were developed by a division of PNOC, while two of the country’s largest projects were originally developed by Philippine Geothermal, Inc. (today known as Chevron Geothermal Philippines Holdings, Inc., or CGPHI, and formerly Unocal Philippines, Inc.).

In March 2004, the Philippines kicked off the Department of Energy Geothermal Contracting Round (known as GEOTHERMAL 1), in an effort to sell off Napocor’s geothermal assets and attract private investors to new projects. As part of this process, there are currently a number of new geothermal power projects in the development pipeline.
Hydroelectric

Hydroelectric sources made up approximately 2,900 MW of the Philippines’ installed electricity generation capacity, or 19 percent of the total, in 2004. The country has not seen a significant expansion in hydroelectric capacity during the last two decades, although some new projects are currently being developed, particularly small-scale hydroelectric facilities.

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