DoE revisits China farm-in to SC 57

The Department of Energy (DoE) is working on accelerating the approval of the farm-in agreement that China National Offshore Oil Co. (CNOOC) signed with the Philippine National Oil Co. Exploration Corp. (PNOC-EC) for Service Contract 57, as this has been pending approval since its signing more than five years ago.

In an interview with reporters, Energy Undersecretary Jose Layug Jr. said the agreement was being reviewed.

In three weeks, all issues hampering the approval should already be resolved, enabling the DoE to submit its endorsement of the deal to Malacañang.

“It was pending before the previous administration in Malacañang, so they followed it up. We’re reviewing the documents and checking whether we can approve the application. The issues pertain more to administrative issues because there was a previous executive order that required certain processes. We need to clarify that,” Layug said.

“In terms of CNOOC’s financial, legal and technical qualifications, we don’t see any problems with that. We just need to sort out the processes required for the farm-in, since CNOOC is one of the most well-respected state-owned exploration companies (in the world),” Layug added.

The SC 57 area lies north of the country’s oil fields, including the Malampaya, Nido, Cadlao and Matinloc. It is within the northwest Palawan block from where most of the country’s oil production comes.

The entire area spans 720,000 hectares.

The contract, which the DoE awarded to PNOC-EC on Sept. 15, 2005, has a seven-year term, with the first three years allotted for the acquisition of at least 1,000 kilometers of seismic data and the drilling of a well.

A few months after the contract award, PNOC-EC entered into farm-in agreements with CNOOC and Mitra Energy Ltd. in January and March 2006, respectively.

CNOOC holds the biggest stake in the project at 51 percent, followed by PNOC-EC at 28 percent, and Mitra at 21 percent.

The farm-in agreement with CNOOC, however, was never approved.

In a related development, Layug said other Chinese companies were looking at bidding for more oil and gas blocks that the DoE was auctioning off via the Philippine Energy Contracting Round 4, which was launched two months ago.

Contracts should be awarded by the first quarter of next year, Layug said.