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
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
"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
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
($1 = 46.57 pesos)