Shell confirms interest in buying crude from Cebu oilfield

Oil refiner Pilipinas Shell Petroleum Corp. confirmed its interest to buy crude oil from the Alegria oil and gas onshore discovery in Cebu for use in its Batangas refinery, a top executive said.

“We are always evaluating whatever may be feasible. What is tricky is if it is compatible to our refinery and is the pricing sufficient for us to make margins but we are open minded,” Pilipinas Shell president Cesar Romero said.

Sources from China International Mining Petroleum Co. Ltd., which owns the service contract for the Algeria oil and gas discovery, said they were hoping to supply up to 10,000 barrels to Shell by early next year.

Tests are ongoing in Hong Kong for the compatibility of the Alegria crude to Shell’s  110,000-barrel- per-day refinery.

“We are actually interested on that, provided it’s economically feasible in terms of compatibility…There is no negative bias for local source but it is only a question of pricing, yield and when we need it at a particular time,” Romero said.

He said the type of crude of Alegria “must be matched with the demand profile and capability of the refinery”.

Shell previously submitted a letter of intent to purchase the Alegria crude.

The letter stated that initial analysis of the quality of the crude oil produced by CIMP found it to be acceptable as a feedstock to Shell’s refinery, “but it is subject to further detailed analysis”. 

The letter also set out that the price of the crude oil produced by CIMP and additional contractual terms and clauses will be subject to negotiations. A formal sales and purchase agreement will be negotiated and executed once negotiations are finalized. 

CIMP holds Petroleum Service Contract No. 49 which covers the Alegria oilfield, an onshore site in the fourth-class town of Alegria in the southern part of Cebu province.

CIMP acquired an 80-percent stake in the participating interest of the SC 49 project and became its operator in July 2009. The contract covers a 25-year production period.

Energy Secretary Alfonso Cusi earlier said the Alegria oil field could power up to 60 megawatts of natural gas-fired power plant and produce up to 360 barrels of oil per day.

“There are two wells that already produced 180 barrels per day. They are ready so we are just scheduling when will be the first delivery, first output,” Cusi said.

He said while the oil flow was minimal compared to the country’s fuel requirements, the Alegria oil discovery would “help the local economy because it will support the local industry, cement factories and local factories using crude oil for fuel.”

“That will be a big help even if it’s small at 360 bpd but a positive development for our exploration. This is onshore and I understand there were attempts for the past 100 years but it is only now that we have this kind of development,” Cusi said.

Cusi said CIMP was also preparing to put up a natural gas plant.

“It’s small but [it] will help Visayas and Cebu,” Cusi said.

Topics: Pilipinas Shell Petroleum Corp. , crude oil , Algeria
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