Saturday, November 10, 2007

Philippines: Nido Petroleum & CGGVeritas Seismic Surveys

Nido Petroleum Ltd is an Australian oil and gas explorer and producer that currently has production, development and exploration assets in the Palawan Basin, Philippines.

Nido Petroleum’s was not always known as Nido, but rather it had a start as a trust called Sydney Oil Company Drilling and Exploration Trust (SOCDET). This trust had a focus on the Philippines, and began to invest in the north-west Palawan Basin in February 1995. Over time, Nido ‘inherited’ interests in Service Contract 14 (SC14) that included the Nido and Matinloc oil production assets and the Galoc oil field. SOCDET then incorporated as Nido Petroleum Ltd in July 1999.

Since entering the Philippines, Nido is now the holder of the second largest oil and gas exploration acreage holder in the region.

There are 4 sedimentary basins found in the region that include:

  • Mindoro-Cuyo
  • East Palawan

  • Northwest Palawan

  • Southwest Palawan

The largest gas and condensate field was discovered in 1991 in the Northwest Palawan Basin and is named Malampaya. Currently the field's lifespan is estimated at 20 years and has gas reserves (estimated) of 3,770 billion cubic feet (BCF) and 85 million barrels (MMB) of condensate.

A Short History of the Region

Petroleum exploration in the Philippines dates back to 1896 with the drilling of Toledo-1 in Cebu Island by Smith & Bell.

Between the 1950's and 1970's widespread exploration activities were carried out throughout the region. During this period, all exploration was governed by Republic Act No. 387 known as the "Petroleum Act of 1949" which introduced the era of the concession system.

In 1973, the current Service Contract System replaced the Petroleum Act of 1949. This came via the enactment of Presidential Decree No. 87, which is known as the "Oil Exploration and Development Act of 1972".

This decree brought with it an attractive contractual term, a very liberal fiscal regime that were particularly favorable to offshore exploration, hence allowing activities to move to offshore areas like the Northwest Palawan Shelf where the first field, Nido, was discovered.

Since then, several small fields, which were located offshore Northwest Palawan, were subsequently discovered and produced.

In 1989, relatively large fields were discovered in the deep waters off Palawan when Occidental tested gas in its Camago Structure.

Alcorn Philippines, in 1990, discovered the West Linapacan Field and commenced production two years later until 1996.

In 1990, Shell discovered Malampaya gas field which became the largest gas discovery in the country. The field was produced in 2002, providing clean fuel to Luzon grid.

Onshore in northern Luzon, the Philippine National Oil Company developed the San Antonio Gas Field in 1994 and continues to supply gas fuel to the local electric cooperative in the province of Isabela.

Some of the incentives used to make exploration viable and attractive in this region include:

  • Service fee of up to 40% of net production
  • Cost reimbursement of up to 70% gross production with carry-forward of unrecovered costs
  • FPIA grants of up to 7.5% of the gross proceeds for service contract with minimum Filipino company participation of 15%
  • Exemption from all taxes except income tax
  • Income tax obligation paid out of government's share
  • Exemption from all taxes and duties for importation of materials and equipment for petroleum operations
  • Easy repatriation of investments and profits
  • Free market determination of crude oil prices, i.e., prices realized in a transaction between independent persons dealing at arms-length.
  • Special income tax of 8% of gross Philippine income for subcontractors
  • Special income tax of 15% of Philippine income for foreign employees of service contractors and subcontractors

Back to Nido

Nido in its Press release at (on September 28, 2007) stated that the seismic survey will be the largest ever undertaken by company -- covering a total area of more than 5,000 kilometres (3,107 miles) of 2-D and 846 square kilometres (327 sq miles) of 3-D seismic data in three permit areas: SC58, SC54 and SC63.

The seismic survey's are being conducted by CGGVeritas. Currently,

  • CGGVeritas MV 'Pacific Titan' (pictured above) was operating in the SC54 block. This survey was designed to provide more information about the Late Miocene 'Pagasa' Turbidite play. Currently data is being processed.

  • Following the completion of SC54, the same vessel started acquiring data adjacent to SC54 and is currently 15% complete.

The Pacific Titan is very well designed and suited for 2D and small 3D seismic data acquisition projects.

Territorial Disputes & UNCLOS

Competing territorial claims over the South China Sea and its resources are numerous.

The 1982 United Nations Law of the Sea allows for a country's Exclusive Economic Zone (EEZ) to extend 200 nm (370.6 km) beyond territorial waters, all the nations surrounding the sea have begun and have been laing claim to great portions of it.

The People's Republic of China (PRC) has stated its claim to almost the entire body.

Areas with potential problems include:

  • Indonesia and the PRC over waters NE of the Natuna Islands.
  • The Philippines and the PRC over the Malampaya and Camago gas fields.
  • The Philippines and the PRC over Scarborough Shoal.
  • Vietnam and the PRC over waters west of the Spratly Islands (See a previous blog). Some or all of the islands themselves are also disputed between Vietnam, the PRC, the ROC, Brunei, Malaysia, and the Philippines.
  • The Paracel Islands are disputed between the PRC/ROC and Vietnam.
  • Malaysia, Cambodia, Thailand and Vietnam over areas in the Gulf of Thailand.
  • Singapore and Malaysia along the Straits of Johore and the Straits of Singapore.
  • The PRC and Vietnam have both been vigorous in prosecuting their claims.
  • The Spratly Islands have been the location of many disputes and armed forces.

Due to such a tense understanding between the nations involved, Joint Development Authorities have been setup in areas of overlapping claims to jointly develop the area and dividing the profits equally without settling the issue of sovereignty over the area. This is true, particularly in the Gulf of Thailand.

Exploration Continues......

As it can be seen, exploration, disputes, and companies and nations are working together, no matter their size to become energy independent.

Junior Oil and Gas companies, such as Nido, focus on one region and develop relationships in the area - leading to new discoveries and a better understanding of the areas that have currently been explored and exploited over the years. As the technology increases and improves yearly, it allows Junior companies to bring life back to old fields or to find new ones, no matter where they are.


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