Group risks losing energy contract

Energy Secretary Carlos Jericho Petilla has threatened to cancel the petroleum service contract of BHP Billiton and its partners for failing to follow through on its planned work program for an oil and gas block off Palawan.

Petilla told reporters that the consortium operating Service Contract 55 are having internal problems, which the proponents must settle soon so they could focus on complying with their commitments to the Department of Energy.

The DOE has already told BHP Billiton that it intends to cancel the service contract if the consortium fails to drill an exploration well by August this year—one of the requirements under the current subphase, Petilla said. This subphase has already been extended previously.

According to Petilla, BHP Billiton is said to be amenable to the cancellation of the SC 55 license.

Although the DOE expects the consortium to seek another extension to fulfill its work commitments, the agency may not be inclined to grant it, the energy chief added.

“It’s very simple. If they don’t want it, I’ll cancel the contract and give to another proponent,” Petilla said, explaining that the agency would not meddle with the consortium’s internal problems.

BHP Billiton holds a 60-percent stake in SC 55 license. Earlier, it submitted plans to drill an exploration well at the Cinco prospect in the first half of 2013 to tap the huge potential resource in the area estimated to contain 2.2 trillion cubic feet (tcf). The potential resource in SC 55 is said to be similar to Malampaya’s proven reserves, which stand at about 2.7 tcf.

BHP Billiton was supposed to drill the exploration well in the second quarter of 2012. But it requested an extension from the DOE, saying that it needed to first secure an appropriate deepwater rig with specialized equipment before carrying out drilling activities in the Cinco prospect.

As the major stakeholder in SC 55, BHP Billiton is also the operator of the field. Australian firm Otto Energy Ltd., through its wholly owned subsidiary, NorAsian Energy Ltd., also holds a 33.18-percent stake. The remaining 6.82 percent is held by a local firm, the Phinma-led Trans-Asia Oil and Energy Development Corp.