An area in the South Sulu Sea about the size of the province of Oriental Mindoro contains over 750 Million barrels of oil could potentially fuel the Philippines for next seven years.
The Philippine’s daily crude requirement is roughly around 300,000 barrels where the bulk of it is being supplied to the transport industry. With the current production of 10 percent per day, the local pump prices are susceptible to changes of prices in the global market.
The Department of Energy (DOE) estimated that Service Contract 56 in the South Sulu Sea could possibly harness more than 750 Million barrels of oil in an area that covers 4,300 square kilometers in water depths ranging from 200 to 3000 meters, 200 kilometers northwest of Bongao and 65 kilometers from the town of Mapun in Tawi-Tawi in the Autonomous Region of Muslim Mindanao (ARMM).
The proximity of the Sandakan basin to its petroleum producing areas in Borneo has been a major consideration in the estimation of its potential to hold an enormous volume of crude oil.
SC-56 covers the transition from an offshore shelf to the abyssal plain. The principal hydrocarbon play is contained within Miocene deep-water turbidite depositional systems in the distal setting of the Sandakan Basin. Gravity-induced thin-skinned tectonism has given rise to a number of large toe-thrust anticlinal structures which have significant hydrocarbon potential, analogous to other circum-Borneo proven deep-water toe-thrust belts such as the Kutei Basin and NW Sabah.
Exploration results from 1972 to 2000 shows direct evidence of hydrocarbon generation in the region.
In 2009, a log from ExxonMobil Exploration and Production Philippines B.V. has encountered reservoir sands and hydrocarbon on its Dabakan-1 well, about 65 kilometers/40miles from Mapun Island, a municipality under the Province of Tawi-Tawi.
ExxonMobil drilled three significant wells Dabakan-1, Palendag-1A wells and a minor discovery at Babendil-1.
After two years of exploration and US$400-M worth of investment costs, ExxonMobil withdrew its 50-percent stake in SC 56 after finding “non-commercial quantities of gas” in the South Sulu Sea.
Equip with up-to-date drilling technology to drill in the deepest areas in SC-56, Total E & P Philippines B.V vested their interest in the SC block believing on its potentials
In 2013, Total E & P Philippines B.V., a local unit of Total E & P of France, enters into a joint venture partnership with Mitra Energy Ltd. of Malaysia. Total bought the 75% of the stake from ExxonMobil Exploration and Production Philippines B.V. (50 percent) and BHP Billiton International Exploration Pty Ltd (25 percent). Mitra operates 25% of the stake at SC-56 at present.
Under the government’s fiscal regime for petroleum development, Oil investors in the Philippines are entitled to a 70% share of revenues from production sales. It was designed to allow the contractor to recover their investment costs.
The remaining 30% will be split into a 60/40 shares. The government will receive the 60% and the rest will be shared equally by the participating parties.
In August 28, 2014, Total formally confirmed its intention to drill an exploration well on the Halcon prospect. Total was given a five year exploration period by the DOE, which will expire on September 1, 2020.
Last May, Mitra reported that Dabakan and Palendag wells could potentially contain 30 million barrels of oil according to a recent contingent resource assessment conducted by Lloyds Register Senergy, an independent reserves evaluator.
The Dabakan prospect was estimated to contain a low, best and high potential of 1.1 million, 4.1 and 20.3 million barrels of oil. The Palendag prospect, meanwhile, is estimated to contain, 700,000 barrels, 2 million barrels and 8.5 million barrels of oil, respectively.
Mitra plans to sell the gas resources via pipeline to Sabah, Malaysia or to a liquefied natural gas off-taker, probably through a floating liquefied natural gas facility to be operated by Total.
While the prices of crude are gaining momentum in the world market, oil and gas investors would soon find its way to the deep waters of the Philippines in search for the “Black Gold”.