THE Philodrill Corp. and PXP Energy expect a “firm” investment commitment of between $1 million and $2 million for the initial stage of their partnership to explore Sulu Sea Basin or “Area 7” of the 14 pre-determined areas offered by the Energy department for prospective investors.
“Normally, $1-2 million,” said Alessandro O. Sales, Philodrill vice-president for exploration and production, in a chance interview last week when asked about the capital outlay for the first phase of the project’s work program.
“Not much,” he said, adding that the amount covers spending for the first 18 to 24 months of the project. “This is the step before you decide whether there is something to drill.”
Incorporated in 1969, Philodrill is one of the pioneers in the Philippine oil exploration industry and remains one of the most active.
Early in its history, the company successfully participated in the drilling of several oil discoveries in the offshore Palawan area, funding its steady growth and profitability through the ’70s and the early ’80s.
Towards the mid-’80s, its petroleum revenues started to taper off, prompting it to diversity out of petroleum operations into emerging economic growth areas. It made investments in property development, manufacturing, mining and financial services, but remaining in local oil exploration.
Mr. Sales said Area 7 in the Sulu Sea Basin has been in Philodrill’s sight since the company bid for a substantial area during a past contracting round under the previous administration.
No award came out of its previous bid, thus the company bid again under the current administration’s Philippine Conventional Energy Contracting Program (PCECP), the new licensing scheme for awarding petroleum service contracts.
Mr. Sales said Philodrill and PXP Energy had previous partnerships, resulting in the decision for the two listed companies to jointly bid for Area 7. No other company submitted a bid for the area.
“Philodrill [is] participating 60%. PXP will participate to the extent of 40%,” he said. “That’s normal joint venture agreement sa mga (in the) service contracts sa (in the) Philippines.”
He said the partners would want to review the “concepts” used in the previous bid to determine why they failed to find a volume of gas or oil that is large enough for commercial use.
“We have to sit down and review the causes for failure,” he said. “May (There was) discovery but not commercial. We want to know before we proceed to drill it.”
He said Philodrill is “very confident” that it would be awarded a service contract for the area after the submission of the legal, financial and technical requirements for Area 7.
“It’s just a matter of completeness,” he said, adding that Philodrill and PXP Energy are “very transparent” with their financial position because their shares are traded in the local stock exchange.
Separately, PXP Energy President Daniel Stephen P. Carlos described Area 7 as having good potential.
“Dati itong area ng (This is the previous area of) Tap Oil of Australia, tapos katabi siya nu’ng (then it is next to) SC (service contract) 56,” he said, referring to an area operated by Total E&P Philippines B.V.
“Sixty percent and operator sila (Philodrill), 40% ang PXP,” he said, adding that the partners are open to taking other partners in the future.
He echoed Mr. Sales’s projected initial investment in the next two years. He also said that PXP Energy was part of the consortium that previously bid for the area under a past contracting round.
PXP Energy has interests in various petroleum service contracts in the Philippines and Peru held directly and through major subsidiaries. — Victor V. Saulon