State-run PNOC Exploration Corp. (PNOC-EC) is now in advanced discussions to participate in the service contract (SC) 6B Cadlao oil and gas production project located offshore northwest of Palawan.
The firm said in a Congressional hearing last week preparations are underway with drilling scheduled this year and production for next year.
Last June, PNOC-EC sent a letter of intent to Sacgasco Ltd., through its wholly-owned subsidiary Nido Petroleum Philippines Pty. Ltd., for a farm-in to SC 6B including the drilling of the Cadlao 4 well as the first stage of redevelopment of the Cadlao oil field.
Under a farm-in agreement, the party which owns interest in an area where oil or gas has been discovered partners with other firms to offset costs associated with drilling and development of resources.
Meanwhile, the company that acquires rights to conduct the drilling will benefit by getting access to a proven source of oil or natural gas without having to discover it themselves.
Based on PNOC-EC’s letter of intent, it will acquire from Nido Petroleum an undivided 20 percent participating interest in SC 6B for the drilling and extended well testing (EWT) of the Cadlao 4 well.
The letter added that PNOC-EC will pay Nido Petroleum, prior to and during drilling and EWT operations, $3.34 million upon execution of a binding farm-in agreement, and up to an additional $10.01 million to be paid upon cash calls as operations commence.
However, the final amount is dependent upon actual approved costs by the Department of Energy.
Last January, documents submitted by Nido Petroleum to the Environmental Management Bureau (EMB) showed that it is preparing for the development of SC 6B.
The filing said the company targets to explore wells in the shallow water portion of SC 6B which is estimated to hold 2 million to 20 million barrels of oil each.
The company estimates in the EMB filing that the required capital expenditure for a three to four well development plan in the SC 6B Cadlao field is at $8 million per well.
The document also stated that the company is pursuing smaller, lower-risk pinnacle reef plays in the shallower waters of SC 6B.
According to Nido Petroleum, the first phase of the project will involve the EWT with one well that will be conducted in the first or second quarter of the year over a period of three to nine months using a mobile offshore production unit (MOPU) and floating, storage and offloading unit.
The second phase will involve an additional one to three wells, with the possibility of changing the MOPU for a small wellhead pressure and storage barge with lower operating cost.
