Otto Energy takes over BHP Billiton's interest in Palawan gas field

Australian oil and gas company Otto Energy Limited is taking over Service Contract (SC) 55 in offshore Palawan after partner BHP Billiton withdrew from the project.

 

In a statement Tuesday, Otto Energy said it has executed final and binding agreements with BHP Billiton Petroleum (Philippines) Corporation to terminate the farm-out agreement over SC 55. 

 

SC 55 is located near the highly productive Malampaya gas field in Palawan.

 

Otto Energy said it has submitted a request to the Department of Energy for re-assignment of BHP Billiton's 60 percent working interest to Otto Energy.

 

Once approved, Otto Energy's working interest in SC 55 will be raised to 93.18 percent from 33.18 percent. Meanwhile, BHP Billiton will have to pay $3 million.

 

Trans-Asia Oil and Energy Development Corp. – through its Palawan55 Exploration & Production Corporation – hold a 6.82 percent interest in SC 55.

 

"The termination of the farm-out agreement with BHP represents a favorable outcome for Otto shareholders, providing us with material funding to allow drilling in SC 55," Otto chief executive officer Gregor McNab said in a statement.

 

Otto Energy also submitted to DOE its work program to drill Hawkeye-1 exploration well in SC 55 as early as the fourth quarter, which – when completed – obligates BHP Billiton to pay a further $24.5 million.

 

The company is also looking for a new partner in the joint venture to take part in drilling Hawkeye-1, noting a number of parties have started due diligence of data ahead of the formal launch of the farm-out campaign. 

 

"This license is a material and high potential permit with a number of exciting prospects and leads within it. We have commenced drilling planning activities and we look forward to unlocking the value from this permit through drilling the first well," McNab said.

 

Last November, BHP Billiton told its partners it will not join the drilling of Cinco prospect and possibly to withdraw from SC 55 due to delays in receiving the environmental clearance from Philippine authorities.

 

In October 2012, Otto Energy said it targets two exploratory wells under SC 55 – Cinco-1 and Hawkeye prospects – as the Department of Energy hopes that the Cinco well can become the next Malampaya gas field if the development of the Recto Bank gets delayed.

 

SC 55 is estimated to have "a potential resource, reservoir equal or a little less than Malampaya," which translates to a potential resource of 2.2 trillion cubic feet of gas as compared to the Malampaya field's proven reserves of 2.7 TCF, Otto Energy said. – Danessa Rivera/VS, GMA News