AUSTRALIAN oil and gas junior Otto Energy is threatening to take on global resources giant BHP Billiton over an alleged dispute related to a proposed exploration well in the Philippines.

Just a week after making a positive announcement on BHP Billiton Petroleum receiving environmental approval for the Cinco-1 exploration well, Otto – BHP Billiton’s partner in the well – had to enter a trading halt and then announced to the market that it had been “verbally” advised its joint venture partner didn’t want to drill the well anymore and was withdrawing from the SC55 licence in the Palawan basin.

Otto said that while it has yet to receive any written notification from BHP or detailed substantiation for the basis of its decision, it is taking legal advice on BHP’s continuing obligations to fund Otto’s working interest through the current Sub-Phase.

“Otto will strenuously enforce its full legal rights under the relevant agreements and seek to protect the interest of Otto and its shareholders in relation to Otto’s interest in SC55,” the company said in a statement to the Australian Securities Exchange.

BHP had previously declared a force majeure over SC55 after significant delays in the approvals, with the drilling of Cinco-1 well over 12 months behind schedule.

In late October Otto had reported that the SC55 JV had received formal Strategic Environmental Plan Clearance from the Palawan Council for Sustainable Development (PCSD) for the drilling of Cinco-1.

At that time Otto said that following official receipt of the SEP Clearance, it expected BHP to finalise the contracting of an appropriate deepwater drilling rig in order to undertake drilling of Cinco-1.

It also stated that BHPB had engaged with the Philippines Department of Energy regarding the revised timing of the work program commitments and it is expected that this will be the subject of a separate announcement shortly.

Otto also recently said that the SC55 operator (BHP), and joint venture partners, remained committed to drilling Cinco-1.

According to Otto, a robust, diverse and extensive portfolio of exploration prospects and leads has emerged in SC55 from recent analysis of more than 240,000 hectares of 3D seismic data acquired in 2010. It said this portfolio has significant depth and variety and will present a high impact exploration drilling program for Otto over the remaining term of the exploration licence.

SC55 contains both carbonate and sandstone reservoir targets in a variety of settings, with the Cinco and Hawkeye prospects providing an indication of this diversity of play type and represent drill mature prospects in the present portfolio.