Only 3 out of 6 expected bidders turn up for PECR 5 auction

Figures_PECR5withSC_05052014Unstable oil prices in the world market and an ongoing territorial dispute between the Philippines and China have led to a low turnout of investors in the Fifth Philippine Energy Contracting Round (PECR 5).

During Tuesday’s opening of bids, there were only three investors that participated in the auction, which was meant to showcase the exploration of potential coal and petroleum areas in the country.

The Department of Energy (DOE) earlier said there were six interested firms.

“We can’t deny that there are problems being encountered in the areas of oil and gas exploration sites. They are also looking at their budget. Like any company, the bidders are monitoring oil prices. They are doing some adjustments in their budget,” said Director Rico Abad of the Energy Resources Development Bureau.

The areas for petroleum exploration include Area 1 in Southeast Luzon; 2 and 3 in Masbate-Iloilo; 4 and 5 in Northeast Palawan; 6 in Southeast Palawan; 7 in West Palawan; and 8 to 11 in West Luzon.

Two of the blocks are close to the Spratly Islands, of which a portion is claimed by the Philippine government, which are areas under territorial dispute with China.

Out of the three that submitted bid proposals, only two were qualified. These are Ratio Oil Exploration Ltd. and Colossal Petroleum. Both submitted complete legal, financial and technical documents.

Ratio Oil bid for Area 4, while Colossal Petroleum applied to explore Areas 5 and 7, or the Recto Bank Block.

Yulaga Oil Exploration Enterprises, which bid for Area 1, was disqualified because it failed to submit complete documents.

The bid documents of Ratio Oil and Colossal will be evaluated for two months. “Originally, the evaluation was supposed to be until September 5, but since there are only a few bidders, it may take only a month to evaluate their bids,” Abad said.

The bids will be reviewed based on their financial, legal and technical aspects.

“All your applications will be evaluated fairly. Our goal is to have production. I believe this is also your goal,” Abad told the bidders.

The DOE launched last year PECR 5, in which 11 blocks covering a total area of 47,840 square kilometers are being offered to potential investors.

Most of the oil-and-gas exploration blocks are located near the Philippines’s main island of Luzon.

The blocks are mainly in frontier regions and cover an average size of 4,350 sq km per block, with the largest covering 5,760 sq km in the East Palawan region.

PECR 5 could increase the country’s oil production to 39,000 barrels per day (bbl/d) by 2019, the US Energy Information Administration (EIA) said  in its latest report.

“In 2013 total oil production was 26,000 bbl/d, while the country consumed 299,000 bbl/d. In May 2014 the government invited tenders for 11 oil and gas blocks in the Palawan Basin and nearby areas, including one in the South China Sea. This exploration bid round could push oil production up to 39,000 bbl/d by 2019,” EIA said.

Area 7, according to the DOE, holds an estimated resource potential of 165 million barrels of oil and about 3.5 trillion cubic feet (tcf) of natural gas.

“As we live within international laws, we seek all diplomatic recourse to assert our claims to the areas in the West Philippine Sea,” outgoing Energy Secretary Carlos Jericho L. Petilla said.

The Philippines imported roughly 270,000 bbl/d of crude oil and petroleum products in 2013, with 35 percent of their crude oil imports coming from Saudi Arabia and Russia. Further, the country possesses the capacity to refine 290,000 bbl/d.

Shell Philippines and Otto Energy play significant roles in the upstream sector, while Petron Corp. operates the largest refinery in the country, supplying nearly 40 percent of the country’s oil needs. The Philippines exports nearly all the crude oil it produces.

“The Philippines is a net energy importer, in spite of low consumption levels relative to its Southeast Asian neighbors. The country produces small volumes of oil, natural gas, and coal. Geothermal, hydropower, and other renewable sources constitute a significant share of electricity generation,” EIA said.

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