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ANALYSIS: What lies beneath the West Philippine Sea

MANILA, Philippines - If what lies beneath the rock outcrops, vast seas and gunboats of the West Philippine Sea is really worth all the ruckus between Manila and Beijing, then the prayers of Energy Secretary Jose Rene Almendras will be answered: vast petroleum resources to spare future Filipinos from volatile fuel prices, insufficient power supply and high electricity rates.

In various fora he attended the past few weeks, Almendras has sung a familiar refrain: the development of indigenous petroleum resources is crucial to securing the country's future energy requirements.

Unfortunately for the Philippines, the area where oil and gas resources have been found - albeit at a smaller scale than in neighboring countries - is in the West Philippine Sea, a.k.a the South China Sea, parts of which are claimed by China, Asia's emerging superpower.

One of the natural gas production sites in the area in offshore northwest Palawan, the Malampaya field, fuels three power plants that generate around 40 percent of Luzon's electricity supply.

Such an indigenous energy source helps temper electricity prices because it displaces oil imports.

"I normally pray for people and I normally pray for situations. It is only when I became energy secretary that I started praying for facilities. One of those facilities is Malampaya. 

You have one platform, one pipeline, one receiving installation which is responsible for 40 percent of your electricity supply," Almendras said. "You have over 2,000 pieces of equipment running at any given day and any one of those pieces can go wrong."

This underscores the need for the Philippines to discover new "Malampayas", especially with the gas field projected to last only until 2024.

But to do so would require a lot of drilling since the Philippines' upstream oil and gas industry has lagged behind its peers in the region.

Benjamin S. Austria, head of the Philippine Chamber of Commerce and Industry energy committee said 600 oil and gas wells had been drilled in the country since 1896. In contrast, drilling activity in Indonesia runs from 200 to 400 wells a year.

The global rule-of-thumb for hitting petroleum resources is one in 16 drilled wells, thus the need to magnify exploration activity in the country, Austria said.

In fact, the Malampaya's resources were tapped only after 30 attempts.

Austria said developing oil and gas resources would help answer consumer concerns whenever fuel prices fluctuate because the country would have its own buffer against volatile international oil prices.

Almendras knows only too well the urgency of the matter: "20 years ago there was no Vietnamese economy compared to the Philippine economy at that time. Today -embarrassing as it may sound - there are probably 10 times more exploration activity in Vietnam than in the Philippines."

Given this, the Philippine government is stepping up efforts to draw investors into oil and gas exploration.

The first step was canceling non-moving contracts; the second step, holding a new round of bidding for petroleum projects. 

So far, the government has made inroads in its campaign to promote the country's oil and gas industry. 

Almendras cites the interest drawn by 15 service contracts the Department of Energy auctioned off to investors recently.

Unfortunately for the Philippines, China's interest in the regional powder keg - where some of these potential petroleum projects lie - also has been aroused.

| May 11, 2012 | Article Link


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