PNOC-EC, BHP Billiton to join forces for West Balabac project

MANILA, Philippines - PNOC-Exploration Corp. and BHP Billiton Petroleum Pty Ltd. are looking at the possibility of working out a partnership to develop the West Balabac area located off the southwestern most tip of Palawan.

Jacinto Paras, PNOC-EC chairman, said BHP Billiton, one of the biggest oil and mineral mining companies in the world, may forge the partnership soon.

“They (BHP) will be operator. We own the service contract. We are still negotiating for the final sharing. They will retain majority because they will be the ones spending,” Paras said.

According to Paras, PNOC-EC has been seeking for a partner to develop the said area so they would share the expensive costs of drilling on deep waters.

Paras said BHP Billiton has signified interest to pour in as much as $100 million to develop the West Balabac oil and gas prospect.

“It costs about $30 million to drill a well. Initially, it will be just a seismic study. The $100 million includes two wells. We are firming up negotiations. They are the only interested party,” he said.

The Department of Energy (DOE) has awarded service contract (SC) 59 (West Balabac) to PNOC-Exploration in January 2006.

South of the SC lies the Malaysian border where several offshore oil and gas fields trending northeast are currently in production off the coast of Sabah and Brunei.

It would be noted that Murphy Oil recently discovered the giant Kikeh Field, estimated to contain 400 to 700 million barrels of oil, in the deepwater area of Sabah considered Malaysia’s first deepwater discovery near the West Balabac area.

“It was Murphy Oil, on American compan,y that found oil in Sabah (that was interested), but because of economic downtrend in the US, they have forfeited, so BHP is next in line,” Paras said.

The state-owned PNOC EC data showed that there is an active petroleum indication in offshore Malaysia and Brunei and continues northward into the western Balabac area.

He said the “continental crust is an attractive exploration objective in this underexplored part of southern Philippines.”

The company had earlier presented the West Balabac project to PTT Exploration and Conoco Phillips in February for a possible farm-in agreement but negotiations did not push through.

The company also presented the project to TAP Oil Limited in May.

“There was a failed bidding and Billiton is the only one that wants to carry on.

However, we cannot detach the fact that there may be interested parties,” Paras said.

The PNOC-EC chairman said they are optimistic that the contract will be signed anytime soon and not later than end of this year.

“We’re at the final stages of negotiation. BHP is one of the largest mining companies in Australia,” he said.