Vital has completed: (1) the initiation of detailed well planning and design for the drilling of the horizontal re-entry and, if successful, extended production testing of the offshore Calauit-1B oil well in Service Contract 50 ("SC 50"); (2) an offshore seismic survey of 450km of 2D seismic on areas governed by Service Contract 55 ("SC 55"); and (3) a prospect study of the offshore Villaba-1ST gas discovery in Service Contract 51 ("SC51").
Service Contract 50
On SC 50, located 150 kilometers southwest of Manila, Vital has commenced the initiation of detailed well planning and design for the drilling of the horizontal re-entry and extended production testing of the offshore Calauit-1B oil well in SC50.
Vital has made arrangements to take delivery of a Multi Purpose Semi Submersible in late 2007. This will allow Vital to take action on their detailed well planning and design for the drilling of the horizontal re-entry of the Calauit 1B in SC50. Calauit's history of production, in concert with independent expert, MBA Petroleum Consultants, has determined that the Calauit 1B oil field may contain up to 39.5 million barrels of oil, of which 6.44mm are recoverable. Vital's net interest in Calauit 1B in SC50 is 148,000 acres (gross 425,000 acres). The agreement requires Vital to drill one well, the target zone is the Nido Limestone having a geologic age of late Oligocene era. The distance to the nearest analogous commercial production is approximately 200 kilometers. Vital expects to target oil in this prospect. The depth of the target zone is approximately 1,750 meters below sea level (approximately 1,650 meters below the sea floor) and the estimated cost to drill and test a well to that depth is approximately US$15,000,000. Vital will pay 65% of the costs to earn a 35% interest. Vital expects the drilling to commence in the fourth quarter of 2007 and be completed in late 2007.
Service Contract 55
SC 55 is the first ultra deepwater block awarded by the Philippine Department of Energy and it spans an area of approximately 2,200,000 gross acres (net to Vital 667,000 acres) and is located approximately 400 kilometers southwest of Manilla in the South China Sea. The two blocks that make up SC55 are on trend with the main oil and gas fairway which contains the recent large discoveries made by Murphy Oil and Shell/Conoco to the south. Vital was part of the seismic survey conducted by the seismic vessel Veritas Searcher in conjunction with the Philippines National Oil Company, Nido Petroleum, China National Offshore Oil Company and others. Vital was able to shoot 400 kilometers of 2D seismic under this program in October of 2006 and expects the interpretation of this seismic data to be completed in Q1 2007.
The current focus on SC 55 is on the Marantao prospect, a carbonate, reef, build up of substantial size, interpreted, through reprocessed 2D seismic, to be potentially five times larger than the Malampaya structure, which is the Philippines largest oil and gas field which is presently operated by Shell and is estimated by the Department of Energy of the Philippines to contain up to 500-750 MMBO or 2.5-4.0 TCF of recoverable gas.
Vital's interest in the Marantao prospect and SC 55 were acquired, pursuant to a farm in agreement which required Vital to shoot the 2D seismic program and then may elect to pay 41.25% of the costs of the first well to earn a 30% interest. The target zone is the Nido Limestone of the late Oligocene to early Miocene era. The distance to the nearest analogous commercial production is approximately 200 kilometers. Vital expects to target oil and gas in this prospect. The depth of the target zone is approximately 4,300 meters below sea level (approximately 2,700 meters below the sea floor) and the estimated cost to drill and test a well to that depth is US$30,000,000. Vital expects the drilling to commence by mid 2008 after the seismic interpretation. No marketing arrangements have been made but other producers in the area are obtaining WTI prices on oil and US$3.50 per MCF on gas. This is an exploration prospect.
Service Contract 51
The completion of this survey and data collection comes in tandem with the engineering study of the offshore Villaba-1ST gas discovery in SC 51 which is located approximately 400 kilometers south east of Manilla and is comprised of approximately 1,100,000 gross acres (329,000 net acres to Vital).
Vital acquired the exploratory block, in SC51, which consists of two sub-blocks over the East Visayan Basin. The southern block contains seven identified prospects of which three are drill ready, with a combined potential of 75-465 MMBOE as estimated by MBA Petroleum Consultants of Australia. It is stressed that Vital does not have any reserves and that these prospect estimates are not prepared in accordance with the COGE Handbook or National Instrument 51-101. The target zone is the Barily Limestone having a geologic age of late miocene early pliocene. The distance to the nearest analogous commercial production is approximately 50 kilometers. The depth of the target zone is approximately 1,800 meters below sea level (approximately 1,525 meters below the sea floor) and the estimated cost to drill and test a well to that depth is US$15,000,000.
Recoverable reserves estimates herein are not in accordance with COGE Handbook and should not be relied on.
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