MANILA, March 23, 2006
 (BULLETIN) The government and the stakeholders in the Malampaya gas field have finally firmed up the development terms for the proposed Camago-Malampaya Oil Leg (CMOL) project that is seen to yield up to 40 million barrels of oil for an estimated initial investment of 0 to 0 million.

The process culminated in the signing of two agreements between and among the parties involved.

The first is the Terms of Service between the DoE and the Philippine National Oil Company (PNOC) for the re-appraisal, development and production of the CMOL.

PNOC was given the mandate under Executive Order 473 previously issued by President Arroyo to take the lead in forming a consortium that will pursue development of the oil leg.

The second was a "Tripartite Agreement" among the Department of Energy, PNOC and the consortium members of Service Contract 38, namely Shell Philippines Exploration B.V., Chevron Malampaya LLC amd PNOC-Exploration Corporation (PNOC-EC) providing for the need to ensure the protection and value of the Malampaya deep water gas-to-power project.

Describing it as cooperation towards ensuring the maximization of an indigenous energy resource, Energy Secretary Raphael P.M. Lotilla expressed hope that "the PNOC would be able to optimize the opportunities in the development of the oil rim for the benefit of the Filipino people and with reasonable returns for participating third parties."

To ensure non-disruption of the gas field’s operations, the tripartite deal prescribes a production and operating zone for activities to be carried out under the CMOL terms of service.

This entails setting a "no entry zone" to protect existing infrastructure installed and operated by the SC-38 consortium. The agreement correspondingly prescribes indemnity and insurance arrangements for the protection of the natural gas operations.

Spokesperson for Shell Philippines Exploration B.V. Ding Roco noted that the SC 38 consortium is offering support to the DoE and PNOC so that a safe development of the crude oil reservoir can be successfully accomplished.

As proffered in the terms of service, PNOC is allowed to engage third party participants in the re-appraisal, development and production of the CMOL undertaking; with the end-goal of extracting the targeted volume of crude oil from beneath the gas field.

The consortium to be formed by PNOC is mandated to kick off re-appraisal process for the proposed oil leg from the signing of the terms of service.

Overall, the prescribed period of re-appraisal shall be consummated for two years; and extendible for six months, subject to approval of the energy department.

Signatories to the Terms of Service, other than Lotilla is PNOC President Eduardo V. Mañalac; while the tripartite pact was inked by the energy chief, Manalac, Roco, SPEX Legal Affairs Manager Kiril Caral, Chevron Malampaya President Hank Tomlinson and PNOC-Exploration Corporation Executive Vice President Rafael del Pilar.

It has been explained that re-appraisal operations shall involve assessing crude oil-bearing reservoir; done through geological, geophysical, geochemical and other methods including drilling and well testing.

It was further provided under the development terms that the production period shall commence after both parties declare the discovery of crude oil in commercial quantity; and this should be no later than 60 days before the end of the re-appraisal period.

In view of these developments, an oversight and coordinating committee has been proposed; and be placed under the charge of the DoE "to ensure that operations for the production of oil and gas will proceed safely".

Studies indicated that oil exploration and production activities in the CMOL need to be urgently conducted at this time that extracting the volumes of resources from the oil leg is still possible as the conduct of the activity has not yet been significantly undermined by the continued production of natural gas.

EO 473 was set forth in the government’s aim to aggressively pursue its energy independence agenda, including the development and production of domestic oil reserves in view of the increasing prices of oil and petroleum products in the world market. (MMV)

Chief News Editor: Sol Jose Vanzi

All rights reserved