THE Department of Energy (DOE) reported on Monday that NorAsian Energy Ltd. recently drilled its first exploratory well in onshore Northwest Leyte and expectations are that the well may yield 18 million barrels.

Energy Undersecretary Ramon Oca said the service contract holders of the block will drill Duhat-1 well at a depth of 1,000 meters under Service Contract (SC) 51 covering an area of 3,320 square kilometers at an estimated cost of $5 million for the drilling that will last about 25 days.

He said since SC 51 is onshore, the drilling cost is cheaper than offshore. “The SC 51 consortium is hoping to find oil. We’re hoping to see a minimum of 2 million barrels to as much as 18 million barrels.” 

Otto Energy Ltd., through its Philippine arm NorAsian, owns 80 percent of SC 51 and is operator of SC 51 along with partners Trans-Asia Oil and Energy Development Corp., Alcorn Gold Resources Corp. and Petro-energy
Resources Corp.

In January Otto entered into a farm-out agreement with Swan Oil and Gas Ltd. for the development of SC 51. Otto added that Swan is an unlisted Australian company whose vision is to be a long-term investor, owner, and operator of oil-and-gas projects in Australasia.

As part of the agreement, Otto said it will divest 40-percent equity in SC51 to Swan, but will retain its operatorship status and that Swan will pay $1.5 million toward the drilling of Duhat-1 in San Isidro, Leyte, to earn this interest.

Otto said SC 51 joint operating agreement and farm-in agreement have been amended to split SC51 into a Northern and Southern block and that it has elected to not continue in the South block containing the Argao prospect, giving Swan 80-percent working interest in the Southern block.

Paul Moore, Otto managing director, said the completion of the farm-in has been a key focus of the company. “Otto is moving towards drilling our first operated well in the Philippines, Duhat-1, early in 2011. By reducing our equity to our optimum working interest we have positioned Otto to participate in ongoing investment given exploration success. We are excited to be working with Swan in drilling Duhat-1.”