Philippines' NorAsian Charters Oil Rig, Plans Drilling

MANILA Aug 09, 2006 (Dow Jones Commodities News via Comtex) NorAsian Energy Ltd. said Wednesday it chartered a multipurpose semisubmersible rig for three years which should provide a boost to oil and natural gas exploration in the Philippines.

The company, jointly owned by Australia's Ottoman Energy Ltd. (OEL.AU) and AustralAsian Energy Ltd., is a locally organized exploration business.

NorAsian chief executive officer Ken Fellowes told reporters the oil rig with a production capacity of 45,000 barrels a day is now being built in China and will be delivered in the second half of 2007.

The company will start drilling soon after the delivery, but doesn't have a specific date set.

Fellowes said the rig is primarily intended for NorAsian drilling plans, but may eventually be used by other oil companies in the Philippines.

Oil rig availability has been a problem for companies prospecting for oil and gas in the Philippines, which have yet to yield any large oil discovery in the past few years. The largest was the Malampaya natural gas field with 2.7 trillion cubic feet, discovered in the early 1990s.

Fellowes said it will cost NorAsian around $22 million to mobilize the semi-submersible rig and drill the first well at the Calauit oil field in southern Philippines for a 60-day work period. Drilling two more wells will cost another $32 million, he added.

NorAsian chairman Rufino Bomasang said the company hopes to produce as much as 25,000 barrels of oil a day from three horizontal wells to be drilled in Calauit, which is estimated to contain recoverable oil reserves of up to 12.6 million barrels. He said horizontal drilling and controlled output are required to avoid water seepage.

Calauit, an offshore field that sits below 1,000 feet of water, produced 830,000 barrels of Indonesia Tapis-type crude oil in 1997. But since the oil is trapped in a fractured limestone formation, it is prone to water intrusion that makes production expensive.

Tapis crude is usually 15% cheaper than Brent oil.

Fellowes said the current world oil price and the charter of the rig make reentering Calauit viable. He said with the lower cost of the rig, producing oil from Calauit would be viable even if the price of crude oil falls to $40 a barrel.

Aside from Calauit, NorAsian is also planning to drill the Argao and Cabilao prospects, a few kilometers off the central island of Cebu, and the Marantao prospects beneath 6,000 feet of water in offshore Palawan.

Argao has estimated recoverable reserve of up to 270 million barrels, while Cabilao is estimated to contain as much as 145 million barrels. Both are in shallow water.

Bomasang said NorAsian is very hopeful of finding oil and natural gas in Marantao, a prospect in the South China Sea that is close to Malampaya and "giant" and "super giant" discoveries Malaysia. Drilling on Marantao is scheduled until 2008.

"Marantao may well be the Philippines' next Malampaya," said Bomasang. "It is potentially five times larger."

Copyright (c) 2006 Dow Jones & Company, Inc.

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