"We have looked at the conceptual development in the oil rim. We found out that the concept we will use carries high-risk in terms of capital we have to pour in. This is why we have decided to just look for other options to explore the rim," SPEX managing director Jeremy Cliff said.
Cliff said they would be able to present a new drilling scheme to the government before the end of the year.
The SPEX official pointed out that they would not yet abandon the oil rim development project. "We will continue to explore other ways to develop the rim," he said.
SPEX, the upstream oil development arm of the Royal Dutch Shell Group, said it would decide early next year if it will continue its oil rim development project in the Malampaya field.
Aside from the oil rim, SPEX is also the major operator of the $4.5-billion Malampaya deepwater gas-to-power project along with Chevron Texaco of US and PNOC-Exploration Corp.
Cliff earlier said they would be using a concept which will enable SPEX to drill not only deeper wells in the oilfield but also horizontally. This way, the company could save from the more expensive cost of drilling new wells. However, it turned out that the proposed concept will also be costly for the company.
SPEX is planning to drill five to six more oil wells within its service contract. Since the start of its operations in 1989, it had drilled some 11 wells. Of these, only five wells are producing natural gas and oil.
The oil rim is expected to have a total oil recoverable reserves of 25 million barrels and 25 trillion cubic feet of potential gas reserves.
The drilling of the oil wells could cost as much as $400 million in investments. The drilling of one oil well alone would cost about $30 million.
The Malampaya consortium is studying the oil rim prospects so as not to put to waste government’s money. PNOC-EC, a subsidiary of state-owned Philippine National Oil Co., owns 10 percent in the Malampaya project. SPEX and Chevron Texaco each own 45 percent of the project.
In May 2002, SPEX was able to conclude the extended well tests in the nearby oil field close to its Malampaya natural gas project. After the tests, SPEX will drill more exploratory wells to determine if the oil being produced there would be commercially viable.