First Galoc oil fails to take off again

MANILA, Philippines - First Oil from the Galoc oilfield in Palawan province failed to take off again Thursday, contrary to expectations. Operations have been delayed for seven to 10 more days, company officials said Thursday. Reynaldo E. Nazarea, treasurer and vice-president of listed Philodrill Corp., said Galoc operations may need more time. Operators of the oilfield are already behind schedule for a first-quarter launch. Last month, Philodrill said first oil from the wells had been delayed again by typhoon Frank. "The production vessel just arrived at the site [on June 3] and they are still in the process of setting up the dismantled lines before typhoon Frank hit the country," Mr. Nazarea said in a phone interview. Galoc comes as a relief for the Philippines, which is trying to cut its annual import bill of $6 billion and is reeling from soaring fuel and food costs that have pushed inflation to record highs. The setup for the reconnection of the lines to the floating production storage and offloading system that will extract 17,500 barrels per day from the offshore field is estimated to last from seven to 10 days. Philodrill owns 7% of the Galoc project, which lies some 60 kilometers off the island of Palawan. Philodrill expects to gain $86 million from a daily production of 22,500 barrels at $125 per barrel. The Galoc reservoir is some 2,200 meters below the sea floor and is estimated to have reserves of about 23.5 million barrels of oil, which is expected to hike the country’s oil supply in the country by 70% to more than 40,000 barrels daily. Otto Energy acquired a 31.38% stake in Galoc Production Co. (GPC) in December, with European trader Vitol holding the remaining 68.62%. GPC operates the Galoc field with a 58.29% interest. The remaining 41.71% is split between Nido Petroleum with a 22.28% share and several Philippine partners. These are Philodrill, Oriental, Forum Energy, Alcorn Gold Resources and Petroenergy Resources own the remaining stake in the field. The government earlier said the Philippines would earn from the sale of crude oil that will be benchmarked at international prices and with domestic refineries being given priority. This would translate to $1.4 billion in foreign exchange savings for the country from the start of commercial production until the life of the well expires. Galoc oil is said to be of high-quality, light, non-waxy and has a medium sulphur content. The new crude will be the first major crude oil addition to the Asia-Pacific region. — Ava Kashima K. Austria, BusinessWorld