MANILA, June 12 The Philippines' state oil and gas exploration firm said on Tuesday it expects to choose a partner around October for an oil drilling project in the Malampaya offshore field southwest of the capital.
PNOC-Exploration Corp (PNOC-EC) PECB.PS will tie up with a private contractor to drill in the Malampaya field in the South China Sea, estimated to hold up to 41 million barrels in recoverable oil reserves, company President Rafael del Pilar told reporters.
The private contractor will own 85 percent of a 40 percent share in the oil drilling venture, with PNOC-Exploration taking up the remaining 15 percent of that stake. Under law, the state retains 60 percent of any oil or natural gas venture.
"We are bidding out participation. The bids will be (chosen based on) who would give PNOC-EC best value for our asset," del Pilar said.
"The government owns the resource and they will supervise the service contractor," he said. "The PNOC-EC and whoever our partner will be will comprise the service contractors, we are the contractors of government."
PNOC-Exploration is in talks with eight local and foreign investor groups for the project. Del Pilar did not name the groups but said aside from a Filipino group, more than one was based in Norway while the rest were from Abu Dhabi, the United Kingdom and Australia.
The exploration firm plans to present the terms of reference for the oil project to interested bidders later this month. Investors would be given two months to study the project before the actual bidding.
The contractors will need to initially put up about $300 million in capital spending for the oil project, which is estimated to cost $700 million-$800 million over a 4- to 5-year life cycle. This capital spending would be their payment for their share in the oil project.
"The 40 percent share that we will have together is the fee government is paying the contractor for doing everything, for putting the risk money," del Pilar said.
Del Pilar said the contractor can simply source the project's remaining $500 million capital spending requirement from the project's revenues.
He said some of the previous bidders for the oil project, such as Malaysia's Mitra Energy Ltd., have indicated they will not participate in this year's bidding.
Malampaya is the Philippines' main source of natural gas, but operators of the gas project Royal Dutch Shell (RDSa.L) and Chevron Corp. (CVX.N) opted not to invest in oil production in the field because of the limited reserves.
The government owns more than 99 percent of PNOC-Exploration through the state-run Philippine National Oil Co., with the rest held by the public. The government wants to sell a nearly 60 percent stake in PNOC Exploration in November to fund domestic and overseas exploration projects and pay down debt.
PNOC-EC's B shares PECB.PS open to all investors closed at 23 pesos when it was last traded on May 25. Its A shares PEC.PS restricted to local investors closed at 2.24 pesos on May 4.
($1 = 46.57 pesos)