Joint ex­plo­ration prospects im­prove amid warm­ing re­la­tion­ship with China — BMI

Business World - - THE ECONOMY - Vic­tor V. Saulon

IM­PROV­ING ties be­tween the Philip­pines and China have in­creased the prospect for joint ex­plo­ration in the re­source-rich South China Sea, of­fer­ing bet­ter prospects for lo­cal oil and gas out­put, a re­search firm said.

“Lo­cat­ing new crude oil and nat­u­ral gas sources con­tin­ues to be of para­mount im­por­tance for the Philip­pines as out­put from its sole pro­duc­ing Malam­paya field rapidly de­clines,” said BMI Re­search in its pro­duc­tion out­look for the Philip­pine oil and gas sec­tor.

“Im­prov­ing bi­lat­eral ties with China in­creases the prospect for joint ex­plo­ration in the po­ten­tially re­source-rich South China Sea, and of­fer up­side to our long-term oil and gas pro­duc­tion fore­casts,” the Fitch Group unit said.

It said find­ing new oil and gas sources is cru­cial for the coun­try as the Malam­paya gas and con­den­sates field is near the end of its pro­duc­tion cy­cle. The offshore Palawan gas project is ex­pected to be de­pleted around 2022 to 2024, in­dus­try of­fi­cials had said.

“With no new sig­nif­i­cant projects in the pipe­line, the Philip­pines’ need to ex­plore for ad­di­tional oil and gas is clear,” BMI Re­search said.

Thus far, ex­plo­ration in the coun­try’s most prospec­tive petroleum blocks, par­tic­u­larly those in the South China Sea has made min­i­mal progress be­cause of the mar­itime dis­pute with China.

“How­ever, we be­lieve im­prov­ing bi­lat­eral ties be­tween the two coun­tries in­crease the chances of joint ex­plo­ration in the dis­puted waters,” the re­search firm said.

It added that the view of its coun­try risk team noted “greater scope for co­op­er­a­tion be­tween Manila and Bei­jing” as Pres­i­dent Ro­drigo R. Duterte has taken a “more con­cil­ia­tory ap­proach to­wards China and the for­mer’s grow­ing need for en­ergy.”

“The Philip­pines has re­peat­edly stated its open­ness to joint ven­tures in the area with for­eign en­ti­ties, pro­vided that such ac­tiv­i­ties com­ply with the Con­sti­tu­tion of the Philip­pines,” it said.

The Con­sti­tu­tion states that the ex­plo­ration, de­vel­op­ment and uti­liza­tion of Philip­pine ma­rine wealth must be re­served for the ex­clu­sive use and en­joy­ment of Filipinos.

BMI Re­search said a break­through in the long­stand­ing mar­itime im­passe would al­low com­pa­nies such as PXP En­ergy Corp. to re­sume drilling in Ser­vice Con­tract 72’s Sam­pa­guita gas dis­cov­ery.

It said the 2011 gas find holds up to 4.6 tril­lion cu­bic feet of nat­u­ral gas 115 mil­lion bar­rels of crude oil.

“This in turn, im­proves our out­look on the Philip­pines’ up­com­ing oil and gas li­cens­ing round,” it said.

In July, the Depart­ment of En­ergy said it was plan­ning to hold in De­cem­ber the sixth Philip­pine En­ergy Con­tract­ing Round, or PECR 6, a com­pet­i­tive sys­tem of award­ing ser­vice con­tracts for petroleum and coal prospec­tive ar­eas.

“The round will in­clude blocks in the dis­puted South China Sea, along with offshore blocks in the Sulu Sea, Palawan and those that did not re­ceive of­fers un­der the pre­vi­ous li­cens­ing round,” BMI Re­search said.

“Although ac­cess to the Philip­pines’ fast-grow­ing con­sumer mar­ket may ap­peal to po­ten­tial in­vestors, the suc­cess of the li­cens­ing round will hinge on whether the coun­try is able to dif­fuse geopo­lit­i­cal risks in the area,” it said.

“This is es­pe­cially im­por­tant with low oil prices weigh­ing on firms’ ap­petite for high-risk, fron­tier ex­plo­ration. Th­ese same risks have pre­vi­ously re­stricted in­ter­est in PECR 5, which only at­tracted three bids for the 11 oil and gas blocks that were of­fered,” it added. —

OUT­PUT from Malam­paya field rapidly de­clines

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