DOE extends contract of Australian oil firm

CEBU, Philippines - The Department of Energy has welcomed the discovery of oil by Gas2Grid in its Malolos-1 well in southern Cebu and has extended the contract of the Australian firm for another 12 months.

The DOE ushered in the New Year announcing its support for an oil discovery with potential commercial quantity in the Visayan Basin in a bid to strengthen energy security efforts for the country.

Awarded on January 2004, the operator has drilled for a decade prior to the discovery. With the extension of Service Contract 44, the operator was given an additional 12 months to further develop the well.

On extending the work program of Gas2Grid for another year, Energy Secretary Carlos Jericho Petilla said the discovery is a boost to the country's upstream industry and they will provide the necessary support to advance its development.

"Actually, we are pushing for indigenous energy resources to flourish in order to lessen our dependence to the volatile international energy market," said Petilla in a statement sent to The FREEMAN.

For 2014, the DOE will launch the Philippine Energy Contracting Round 5 within the first quarter of the year.

PECR 5 is a transparent and competitive system for awarding service contracts aimed at attracting energy investors to develop the country's indigenous oil and gas resources.

Gas2Grid Ltd. earlier announced that the DOE has recognized the oil exploration in central Cebu as an oil discovery, as well as the energy department's extension of the firm's service contract for one year.

The recognition of the oil discovery opens the possibilities of the province having a commercial oil field.

The extension of SC 44 will take effect on January 28 and will last for 12 months. The terms of the contract provides that the project covers 750 square kilometers of central Cebu, covering portions of Carcar City, Aloguinsan, Pinamungajan, Toledo City, Naga City, Barili, Dumanjug, Ronda, Alcantara, Moalboal and Sibonga.

Malolos-1, which tested positive for oil production from two separate sandstone intervals, runs at the boundary of Carcar City and Aloguinsan town.

The potential oil volume spotted in the Malolos oil field, based on Gas2Grid's initial assessment, was described as "contingent resource" and ranges between a "low estimate" of four million barrels and a "high estimate" of 42 million barrels with the "best estimate" of 12 million barrels of "total oil in place."

With the extension of the contract, the company intends to conduct oil production testing for a longer period in order to establish its commerciality. —/BRP (FREEMAN)