By Sarah Byrne
LOW SUCCESS rates and complex geology were cited by Otto Energy managing director Matthew Allen as the key reasons for Otto exiting its Philippine assets at the end of 2015.
In its December quarter report, Otto said it had commenced a structured exit from its Philippine assets, including service contract (SC) 55 and requested a two year moratorium on future development work from the Philippines Department of Energy.
Mr Allen told Oil & Gas Australia that the continuing joint venture partners wanted the moratorium to give them enough time to analyse the prospectivity of the acreage before having to commit to a further deepwater exploration well in SC55.
Continuing joint venture partners Trans-Asia, Pryce Gases and Red Emperor Resources requested the analysis after the Hawkeye 1 well was found to be not commercially viable.
Mr Allen said the minimum work commitments have been met by the joint venture and the companies are now waiting for the Department of Energy to approve transferring of Otto’s 68.18 per cent equity to the continuing partners.
Mr Allen said Otto was exiting the region in order to focus on lower risk opportunities within its portfolio, such as its Gulf of Mexico assets.
“The historical success rate for drilling exploration wells in the Philippines is very low, making this a very challenging environment in which to continue this sort of business,” he said.
“The geology in the Philippines is very complex making the likelihood of finding a replacement for the ageing Malampaya project more difficult.”
In its half year report, Red Emperor Resources said it was optimistic about developing the Philippines acreage.
“Although the well did not encounter gas in commercial quantities, it proved the presence of an active petroleum system in the contract areas, which hosts the “Cinco prospect” as well as several other leads,” the company said.
Red Emperor said it was considering whether to maintain its 15% interest in SC55 or be assigned a percentage of Otto’s interest on a pro-rata basis – lifting its stake to 37.5%.
A response from the Department of Energy with respect to a moratorium is expected in the first quarter of 2016.
Red Emperor said the consortium intends to undertake further technical studies during the moratorium period, including a quantitative interpretation study.
This is a recent geophysical technique that is designed to gain a better understanding of existing and potential petroleum reservoirs, Red Emperor said.
Commenting on why Otto is turning its attention to the Gulf of Mexico, Mr Allen said he believes oil can be produced at the right price for these market conditions.
“In the currently depressed oil price environment, this [Gulf of Mexico] is one of the few areas in the world that can economically produce oil at these oil price levels,” he said.
“Projects require breakeven prices below US$20 per barrel in order to survive – typical Philippines projects have breakeven oil prices greater than US$60 per barrel and won’t survive in these low oil price environments,” Mr Allen added.