SC 55 bloc bent on securing license for oil, gas prospects

MANILA, Philippines—Exploration giant BHP Billiton has submitted a formal notice of “force majeure” to the Department of Energy as it moves to secure its Service Contract 55 license, despite its inability to comply with its current contractual obligations.

BHP Billiton, according to its partner Otto Energy Ltd., submitted the notice to “suspend the timing of current permit obligations and preserve all permit rights” covering prospective oil and gas blocks off Palawan.

“The declaration of force majeure comes amid delays in receiving the Strategic Environmental Plan Clearance (SEP Clearance) for SC55 from the Palawan Provincial Council for Sustainable Development,” Otto Energy explained in a regulatory filing.

“The SEP Clearance would ordinarily have been expected to be received in September 2012 and the notice of force majeure seeks a suspension of permit obligations from this date until the receipt of the SEP Clearance,” the company added.

The lack of this SEP Clearance has hindered the SC 55 consortium from proceeding with the drilling of an exploration well at the Cinco-1 prospect, which is a requirement under the current exploration subphase for SC 55 ending in August this year.

Energy Secretary Carlos Jericho Petilla himself earlier warned that the DOE would cancel the license of the SC 55 consortium if it were to fail to comply with the planned work program.

The SC 55 consortium is composed of BHP Billiton, which holds a 60-percent interest; Otto Energy, with 33.18 percent; and the Phinma-led Trans-Asia Oil and Energy Development Corp., with 6.82 percent.

“The effect of issuing the notice of force majeure is to suspend the obligations under the current fourth subphase of SC55, including the drilling of the Cinco-1 well, and to preserve the remaining time under the exploration period of SC55 until the SEP Clearance is received. The operator, the SC55 joint venture and the Philippine Department of Energy will continue to work towards securing the SEP Clearance and, in doing so, remove the cause of the force majeure,” Otto Energy explained.

But Otto Energy is unable to provide a timeframe on when it can receive the SEP Clearance.

BHP Billiton and its joint venture partners said that they remain committed to delivering the Cinco-1 well despite the difficulties they are currently facing.

Once the SEP Clearance is secured, BH Billiton will secure an appropriate deepwater drilling rig in order to undertake drilling of the Cinco-1 well.

“The Cinco prospect in SC55 is an exciting and material opportunity and we look forward to BHP Billiton concluding final clearance of the SEP and drilling the Cinco prospect. BHP Billiton has reiterated that its objective remains to fulfill its contractual commitment to drill the Cinco-1 well in SC55 at the earliest opportunity and all parties will continue to work towards that goal,” said Otto Energy chief executive officer Gregor McNab.

SC 55 reportedly contains a huge potential resource of about 2.2 trillion cubic feet (tcf). The volume is said to be similar to Malampaya’s proven reserves.