Recto Bank: Petroleum Discovery's Gateway?

Article excerpt

MANILA, Philippines --- To the energy secretary, if the estimated huge reserves at the Recto Bank will be realized - it can redeem the country on its long-term quest for new gas finds.

"The potential (at the Recto Bank, which is also called the Reed Bank) is bigger than Malampaya," Energy Secretary Rene D. Almendras has told media, way before service contractor Forum Energy plc, a listed firm in the United Kingdom, came out with its own numbers as to the scale of gas repository at its exploration area.

This is the hitch. The block is not necessarily sitting on "a path of least resistance." That even before the contractor-firm can jumpstart its planned drilling of three wells this year, tensions are escalating anew between China and the Philippines on territorial claims at the South China Sea.

This then prompted the Department of Energy (DoE) to drop hints that Forum Energy may be given an extended deadline if circumstances would warrant so. The planned well drillings will form part of the second sub-phase of Forum Energy's submitted work program for Service Contract 72, for the block located along northwest coast of Palawan and southwest of the Shell-operated Malampaya field. The contractor-company said it is scheduled to plough in $75-$80 million for the drillings.

Going back to President Aquino's SONA, he averred that "whoever steps on Recto Bank will be likened to someone who is stepping on Recto Avenue." So far, it was his way of solidly claiming that the Reed Bank is a Philippine territory.

Brave words! But has that been enough to calm and assure investors that they would not be spending sleepless nights pondering if their drilling plans will proceed seamlessly as the government would want to portray? Not much success on that aspect yet, I guess; and as they say, courage does not always roar.

Aside from SC 72 (which was converted from GSEC 101 in February 2010); three more contract areas were previously awarded within the Reed Bank area - including Service Contract 15; as well as GSECs (geophysical survey and exploration contracts) 63 and 97.

In several media interviews, Philex Mining Corporation chairman Manuel V. Pangilinan asserted that "we should be allowed to proceed with our programmed drillings. We have to validate if there's really something in there," inferring that at the end of the day, the skirmish may just be proven futile if the fields would not yield commercial quantity. Philex Mining, via its subsidiaries FEC Resources and Philex Petroleum, holds the majority interest of 64.45% in Forum Energy.

Before the farm-in deals made with Philex Mining, Forum Energy originally listed FEC Resources Inc. of Canada as its major interest-holder with 30.65% equity; and by UK's Sterling Energy Plc with 13.94%. The rest of the shareholders were investment banks Moore Credit Fund (now James Caird Asset Management); Rathbone Unit Trust Management Ltd.; Morgan Stanley Securities Ltd.; Fidelity Int'l Ltd. and FMR Corp.; and the local partner then was Basic Petroleum Corporation of the De Venecia group.

Since then, several farm-in agreements were made with Philex Petroleum under the watch of businessman Walter Brown buying into the equity shares of FEC Resources, Sterling and Basic Petroleum. Brown's group eventually sold majority of the shares to Pangilinan's group, while Monte Oro Resources Energy (wherein Brown is also affiliated with in the group of tycoon Enrique Razon) maintained the minority stake of 30%.

SC 72 reserves; Scaled up or scaled down?

At its recent announcements, Forum Energy indicated that the Recto Bank shows potential of up to 16 trillion cubic feet (TCF) of gas, which could be roughly five times the estimated proven of serves at the Malampaya field. Purportedly, this was jacked up from the initial 3.4 TCF potential reserves earlier indicated by the company.

Mr. Almendras was also quick to add that such scale of reserves would be able to meet the country's demand for natural gas for the next 100 years. …