ExxonMobil opts out of N Palawan project

MANILA, Philippines - The Philippines stands to lose a major investment in the upstream oil sector after ExxonMobil Exploration and Production Philippines B.V. decided to withdraw its exploration activities at Service Contract 56 in Northwest Palawan.

In an official statement, ExxonMobil confirmed Energy Secretary Jose Rene Almendras’ hint that the SC 56 contractor’s report may result to a possible pullout, as the wells “may be considered too small for a big company as ExxonMobil.”

“ExxonMobil drilled the four wells to test a new exploration play concept. While it encountered gas in three of the four wells drilled, non-commercial quantities of gas were found and ExxonMobil will withdraw from SC 56 and resign as the operator,” it said.

ExxonMobil said it will assign its interest in SC 56 to its partners.

Aside from Exxon, which holds a 50-percent stake in SC 56, other members of the consortium are Mitra Energy (Philippines SC 56) Ltd. and BHP Billiton (International Exploration Pty Ltd.) with 25 percent each.

ExxonMobil, the world’s largest publicly-traded international oil and gas company, earlier drilled four deep water wells at a cost of $400 million to explore for oil and gas in SC 56. The area covers 8,200 square kilometers and includes the gas-rich Sandakan Basin.

For his part, Almendras said ExxonMobil’s decision to withdraw in a field which it believes is not commercially viable is “normal” for any oil and gas exploration firm.

“That is normal. Oil and gas exploration is hit-and-miss which is why we want to offer more areas for better chances of success,” he said.

The energy chief said he has yet to receive official notice from the other partners of ExxonMobil on how they will proceed with the development of SC 56.

But Almendras said ExxonMobil’s decision to withdraw has “no effect” on the government’s ongoing Philippine Energy Contract Round 4, launched in June.

Despite the pullout in SC 56, Almendras said ExxonMobil still considers joining the bidding for the oil and gas exploration contracts under PECR 4.

“That’s really how exploration is, which is why the yields have to be good to recover the misses,” he said.

Earlier, the DOE chief noted that ExxonMobil’s decision would depend on a number of factors such as water depth, which entails higher cost. 

Energy Undersecretary Jay Layug, for his part, earlier said large exploration firms like ExxonMobil are interested in “huge fields or reservoirs.”

“They usually leave the small fields to small or medium-sized exploration companies. Most of the fields we have in the country are marginal fields, which means relatively small reservoirs. Malampaya, for instance, has 2.7 trillion cubic feet, enough for a big oil and gas company to go in to,” Layug said.

Energy officials earlier estimated that the SC 56 field could contain about 750 million barrels of oil equivalent which can supply the domestic market for seven years.