The public should not expect the drilling of the Cadlao oil field off north Palawan to have a significant effect on still-rising local oil prices, the Department of Energy said Wednesday.
The Philippines’ current demand for petroleum is at 325,000 barrels per day, while Cadlao is only expected to produce 5,000 to 15,000 barrels per day by 2024, Energy Undersecretary Alessandro Sales said.
It will also take time for the Cadlao field to move from drilling to actual oil production, Sales added.
But the DOE official said Australian firm Nido Petroleum Philippines Pty. Ltd. and its consortium partners are looking at investments of about $72 million to develop two oil fields in northwest Palawan.
Nido Petroleum is developing Service Contract 6B, or the Cadlao oil field, and SC 54, which holds four discoveries, including Tindalo and Yakalto.
Sales said the agency had given the go signal for contractor-operator Nido Petroleum to proceed with their site survey in Service Contract 6B of the Cadlao oil field.
“Around $16 million per well as per the budget they submitted. In Cadlao, they are undertaking extended production tests, so an additional $40 million,” Sales said.
Cadlao is an old oil field that was last produced in the early 1990s with over 11 million barrels.
“Realistically speaking, we are talking in Cadlao, we expect the well to be drilled in the first half (of 2023). The extended production testing could run up to a maximum of 6 months,” he said.
The production facilities can be installed by 2024 and production can proceed from that period, he said.
However, Energy Secretary Raphael Lotilla said they are hoping for the success of Cadlao to help convince more foreigners to develop other prospective oil fields in the Philippines.
“It is just one, first step because this is not of course going to make a massive impact on the supply requirements of oil in the Philippines. But if this is going to be sustained, then we are going to see further development of other service contracts in the country,” Lotilla said.
The DOE says Nido Petroleum’s drilling activities at Cadlao alone will cost $72 million for two wells and the extended production testing.
That is about P4.2 billion based on the latest exchange rates, a cost the Philippine government cannot afford to shoulder on its own due to the high levels of debt and tight fiscal space created by COVID-19 pandemic spending.
Lotilla said the government’s commitment to preserve and maintain the investment incentives for service contractors under Presidential Decree (PD) No. 87 has been met with renewed confidence and strong interest by local and foreign investors in the oil and gas sector.
“As the President stressed, this is a strong response to the representations and assurances we have given both foreign and domestic investors regarding the government’s commitment to uphold and apply the investment incentives under PD 87,” he said.
Ensuring all Philippine government agencies deliver on promises of ease of doing business during this time will help encourage more investors to come and help explore more prospective oil fields.
The DOE also assured the media that Cadlao is situated well within Philippine territories, so security will not be an issue.
They also stressed that the Department of Environment and Natural Resources and the Palawan Sustainable Development Council willcarefully monitor the drilling activities to ensure any damage done to natural resources of the area is minimized.
“Schedule of the drilling will be firmed up by the time the contract with the drilling rig is executed, but the target remains to drill by the first half,” Sales said.
He said a permanent production facility will be installed by the first half of 2024 if the extended production test is successful.
“Continued permanent production can proceed from that period onwards,” Sales said.
The same rig will be used to drill a well in SC 54.
“We are looking very closely at the exploration well that they are going to drill in this service contract because it could actually open up new ideas and concepts in drilling in northwest Palawan,” he said.
Meanwhile, Lotilla said the DOE is in constant touch with security agencies to ensure a safe drilling environment for service contractors.
“These activities are taking place in areas that are indisputably within Philippine jurisdiction. In the case of Cadlao, drilling activities there began in the 90s. In the case of SC 54, exploration activities also took place there in 2008,” the secretary said.