WHILE its neighbors in Southeast Asia have been drilling on average petroleum wells in the double- and triple-digit averages per year in the past decade, the Philippines has drilled only five wells, raising concern that it badly needs to catch up in the upstream petroleum industry
Painfully cognizant of this, the Department of Energy (DOE) had made it its thrust to establish a sustainable petroleum exploration and development program to put the country’s energy sector on a par with its neighbors, especially in the Asean region.
DOE officials are confident this can be done. “The country is currently number one in environmental sustainability. Now, we need to work on other factors to make the country more competitive,” said DOE Undersecretary Felix William Fuentebella in an interview.
He was referring to the Philippine Conventional Energy Contracting Program (PCECP) launched in November.
The DOE is pinning its hopes on the new contracting exploration program in its pursuit of energy independence and sustainability.
“PCEP aims to make the Philippines improve on the energy and energy equity indexes in the energy trilemma,” added Fuentebella.
“We have to be aggressive in our pursuit of achieving energy self-sufficiency as envisioned by the Duterte administration. Maximizing our exploration and development activities would help us keep up with energy sector developments and economic changes in the ASEAN region and worldwide,” DOE Secretary Alfonso G. Cusi said.
According to the DOE, Indonesia drilled an average of 903 wells per year while Thailand drilled a total of 594 wells per year from 2007 to 2017. This puts the Philippines way behind its neighbors in the Asean. While the Philippines drilled five wells on average a year, the rest of Asean have these numbers: Myanmar (29), Malaysia (81), and Vietnam (43).
“We could no longer be complacent and subject ourselves to the volatility of the global oil markets. We need to explore, explore, explore,” Energy Secretary Cusi stressed, underscoring the impact of such drilling frenzy on the country’s attainment of energy security.
He said the increase in global exploration and development activities is a measure to cushion the transport and power sectors against the volatility of world market oil prices.
Beyond Malampaya
“This (PCECP) could mean a lot for the country in our search for a new source of energy like the Malampaya,” said Cusi, as he cited Malampaya’s projected natural gas production depletion by 2024 onwards.
The Malampaya Deep Water Gas-to-Power Project, under Service Contract 38, is the largest and most successful natural gas industrial project in the country, serving about 30 percent of the power requirements of Luzon.
There are currently 23 active petroleum service contracts in the Philippines with the following developers: Shell Philippines Exploration, Total E&P, PNOC-EC, Nido Petroleum, Philodrill, PXP Energy and Galoc Production Company.
The largest and most successful natural gas industrial project in Philippine history is the Malampaya project.
According to the DOE, the PCECP is a new mechanism as it offers a two-pronged approach, unlike the earlier Philippine Energy Contracting Rounds (PECR) wherein investors can only bid in areas determined by the government for exploration. It is a new and transparent petroleum service contract awarding mechanism that allows the government to develop and utilize indigenous petroleum resources under a service contract with qualified local and international exploration companies.
The PCECP also allows investors to nominate their own areas of interest. In this mode, applications could be submitted at any time of the year and would be subjected to a 60-day challenge period. Awarding of service contracts would be done either through the competitive selection process or via nomination.
“The program was enhanced to encourage stakeholders to invest, explore, develop, and produce the nation’s indigenous energy resources,” Cusi said. “It is our intensified approach to harness these resources for long-term energy security and energy self-sufficiency,” he said.
The DOE launched the PCECP days after the Philippines and China inked a memorandum of understanding on joint cooperation to explore resources in the West Philippine Sea.
Since the PCECP was formally opened, the agency has received firm interests from 13 firms to explore pre-determined areas for possible oil and gas reserve while eight firms have nominated their respective areas of interest.
“Thirteen have applied for the pre-determined areas and eight nominated for potential areas. So, actually PCECP is a hybrid of PECR and application by nomination,” said DOE Undersecretary Donito Marcos.
Pre-determined areas
The 14 Pre-Determined Areas identified by the DOE are as follows:
Area 1 is in Cagayan Basin; Area 2, 3, and 4 are in East Palawan Basin; Area 5, 6, and 7 are in Sulu Sea; Area 8 and 9 are in Agusan-Davao Basin; Area 10 is in Cotabato Basi; and Area 11, 12, 13, and 14 are in West Luzon.
The East Palawan Basin, consisting Area 2, 3, and 4, hosts existing drilling activities that have proven the existence of a petroleum system in the area.
The West Luzon Basin, on the other hand, has large economic potential as the location is near Clark and Subic which host key economic zones.
The application period for these areas is 180 days from the launch last November 22.
Alternatively, the applicants could also nominate and publish other areas of interest within Exclusive Economic Zone (EEZ) for exploration at their own expense. However, the application to explore a nominated area shall have DOE’s approval.
In this mode, applications could be submitted at any time of the year, and would be subjected to a 60-day challenge period.
All accepted applications shall be evaluated by the DOE Centralized Review and Evaluation Committee based on the criteria pursuant to Department Circular No. DC2017-12-0017.
Marcos said two areas outside of the 14 pre-determined areas have been nominated for exploration.
The service contract duration is seven years and extendable to another three years for the exploration phase. The production phase has 25-year contract that can be extended to another 15 years. But “no service contract can go beyond a stipulated 50-year period”.