Spex takes over Fuga project

Shell Philippines Exploration BV (Spex) and the Philippine National Oil Corp. (PNOC) have entered into a farm-in agreement that will allow the former to assume operatorship of the Fuga Island exploration project.

The Fuga Island project has an estimated five trillion cubic feet (TCF) of natural gas, which could provide power for a 5,000-megawatt (MW) combined cycle turbine power plant.

Under the agreement, Spex has the option to assume the operatorship as well as acquire up to 50 percent of the PNOC interest for the possible joint development of the natural gas project.

"This agreement expands the Philippine natural gas industry beyond the trail-blazing Malampaya gas-to-power project," the PNOC statement said.

The accord will take effect after the drilling of the Fuga-1 wildcat well in Barangay Fuga, Fuga Islands, Aparri. The well has a programed total depth of 2,200 meters (7,100 feet) and its completion is programed within 55 days upon start of drilling. The initial project cost has reached over $4 million.

Prior to the entry of Spex, the Fuga Island project is operated by a consortium composed of PNOC as operator with 78.75 percent interest and four Australian companies -- Euro Pacific Energy (6.875 percent), Stirling Resources (6.25 percent), Hardman Resources (5.623 percent) and Nido Petroleum Philippines (2.5 percent).

A seven-percent equity window remains open for the Fuga Island Holdings Inc. (FIHI), the company of mega-millionaire Tan Yu, owner of the island. The Tan Yu group entered into a compromise agreement for the consortium to explore and develop what is perceived as a natural gas reserve in the Fuga Islands.

The consortium has an unlimited access to the gas fields under geophysical survey and exploration contract (GSEC) No. 84 which covers approximately 830,000 hectares of predominantly offshore license acreage over the northernmost portion of Luzon and the Babuyan Channel.