MANILA, Philippines - Amid rising tensions between the Philippines and China over a section of the West Philippine Sea, a member of the private consortium exploring oil in the area said it may have made a "world-class discovery."
Officials of Atok-Big Wedge Co. told shareholders during its annual meeting that a report from experts commissioned to assess Service Contract (SC) 72 in Reed Bank has yielded a “world-class discovery.”
Walter Brown, Atok vice chairman, said the board met last week to assess the results of the seismic test at SC 72, also known as the Recto Bank, and they were “encouraged” by what they have seen from the report.
“The results were extremely favorable and we’re very optimistic about it,” Brown said, adding that based on their assessment, Atok has to defer other exploration projects, especially in Laos.
“We’re focusing now on oil and gas. It’s not difficult but you have to decide. But at this point we are much more interested in this prospect,” Brown said, referring to SC 72.
Atok is allotting P350 million for oil exploration and only a minuscule amount would go to mining, the official said.
The executive was not at liberty to disclose what the report contained only to say that it is a "world-class discovery.” Atok management has to wait until Forum Energy Plc discloses the information at the London Stock Exchange in the coming days.
“The results very much exceeded our expectations. We are very happy.” Roberto V. Ongpin, Atok chairman, told shareholders.
Brown said that there are several public companies involved in exploration activities in SC 72 and that Atok management does not want to preempt the others who have bigger stakes in the field that covers the Sampaguita prospect.
Atok has a 25.6-percent stake in Forum Energy, which owns 70 percent of the consortium that holds SC 72, with the rest owned by Monte Oro Resources & Energy Inc.
Forum Energy is majority owned by Philex Petroleum Corp, a unit of Philex Mining Corp. chaired by Manuel V. Pangilinan, who is also the chairman of TV5 and its online news portal InterAksyon.com.
Pangilinan had said the reserves in SC 72 could rival that of the Malampaya field.
Given signs that the prospect is economically viable, the consortium will start drilling by the end of the year. The question of whether to drill one well or a back-to-back well however remains on the table.
According to Atok officials and shareholders, the Swedes had drilled the area around Reed Bank in the late 1970s until the early 1980s, yielding some gas discoveries. This prospect was later abandoned for failing the test of economic viability.
However, the oil and gas exploration landscape has changed since, especially with the Malampaya field now producing the gas requirements of the Philippines, which is scrambling to build more power plants that use fuel other than coal and crude to stave off a power crisis, Brown said.
When asked if SC 72 contained oil, Brown said that as a geologist by profession, "there is probably a condensate. Geologically, there is a possibility of oil but not in the upper zone.”
According to a source at the Department of Energy, the “condensate” in a gas field is the liquid component, “or in layman’s terms, crude oil.”
To date, only the Galoc field within the vicinity of the Calamian Group of Islands in Northern Palawan produces oil in the Philippines.
Brown said a third-party validation would follow to ensure Atok’s interpretation of the test data is correct.
Seismic testing was halted last year as two Chinese patrol boats threatened to deploy a survey ship in the area.
China has been claiming Reed Bank as part of its territorial waters, but the Philippines has maintained that its part of the West Philippine Sea.
“[But] it depends upon who defines it. The Chinese are claiming the entire area. As far as our government is concerned it [SC 72] is in the Philippines,” Brown said.