Pump Prices Will Not Lower Despite Increased Supply

Prices of pump products in the Philippines will not be lowered by the thousands of gallons of light crude oil to be extracted from the offshore Galoc oilfield in Palawan, former energy secretary Vince Perez said Friday.

Perez, who is now a director of one of the private companies involved in the Galoc oilfield development, said the crude oil extracted from the oilfield will be sold at regular market prices in the world market.

He said pump prices in the country may only slightly go down if the developers decide to sell the “Palawan light oil” directly to Philippine oil firms.

Perez said the government will still earn from the Galoc oil production through royalty payments.

The government will receive a 60% royalty for every net income earned by Galoc Production from the Palawan oilfield and only 40% of the oil’s net income will go to the consortium of over 12 companies that developed the oilfield.
The oilfield started producing light crude oil around 10:45 a.m. Thursday. Perez said the oilfield is expected to produce up to 20 million barrels of oil in four or six years or 20,000 barrels of oil daily.

Galoc Production is a joint venture owned by a subsidiary of the Vitol Group and Otto Energy Ltd. It formed a consortium composed of Nido Petroleum Pty Ltd., Oriental Petroleum and Minerals Corp., The Philodrill Corp., Forum Energy Philippines Corp., Alcorn Gold Resources Corp. and PetroEnergy Resources Corp.

GPC, which holds Service Contract 14C, owns 58.29 percent of SC 14, while Australia-based Nido Petroleum Ltd. owns 22.28 percent.

The oil exploration began in the early 1970s when the Philippines sought growth and self-sufficiency in energy production. In 1972, the government sought exploration in the Palawan-Sulu seabed where oil was initially discovered in the Nido oil field in 1976.

The oil extracted from the Nido oil fields, however, was not enough to meet the increasing domestic fuel demands.

The increasing fuel crunch prompted the government to look for other alternative sources of energy.

The Galoc Field was discovered in 1981, but the oil field was not developed due to the combination of risks associated with the reservoir and low oil prices.

Since then, advancements in technology have improved the capability of defining the reservoir and resulted in the need for fewer wells to access the reserves than previously necessary.

This has been successfully achieved with the recently drilled horizontal development wells Galoc-3 and Galoc-4.

Presently, production is from the first well, with the second well due to come on-line shortly.

The current development was initiated in mid-2005 when GPC farmed in to the existing Service Contract SC14-C Galoc Sub-Block.

It was originally scheduled for first oil production in April but mechanical problems and bad weather pushed it back by another five months. Delays reportedly resulted in an increase in cost from $86 million to over $120 million.

President Arroyo, in her speech before businessmen at the Philippine Business Conference in Makati City Friday morning, said the Galoc oil development will bring the country’s energy independence to 60 percent in two years.

The Department of Energy said crude oil that will be extracted from the oilfield will “provide for six percent of the daily oil demand of the country.”

Perez said the Philippines consumes at least 300,000 barrels of oil a day.

Author: Jo Amey