With Malampaya producing, here are other Philippines exploration targets

Shell-Texaco-Philippine National Oil Co. (PNOC) started the flow of gas from Malampaya field off Palawan Island on Sept. 27, 2001. The produced gas passes through a 504 km submarine pipeline from giant Malampaya deepwater gas field off the northwest coast of Palawan to Tananga, Batangas, about 130 km south of Manila (Fig. 1).

This culminated some 12 years of effort from discovery of the Camago-Malampaya trend by Occidental Petroleum Corp. in 1989. It also represents the first major discovery in the Philippines: 2.8 tcf of gas and 268 million bbl of oil in place. It is the first really significant hydrocarbon discovery in the Philippines after nearly 105 years since the first wells of record were drilled at Toledo, Cebu, in 1896.

Is Malampaya the only major accumulation to be found in the Philippines? Are there other smaller but economically viable deposits to search for in the Philippines? The writer believes the answer to the latter is yes for sure, and perhaps in due course even other major discoveries will be made.

What is the impact of Malampaya on future exploration in the Philippines? Two major aspects relative to prospectivity and value are suggested by the discovery at Malampaya and its commercialization.

First, it demonstrates the importance of natural gas and its use in the power industry of the Philippines. The initial contracts are reported to be for the provision of gas for 20 years to three power plants generating a total of about 3,000 MW/day. Second, the production at Malampaya will likely cause the focus of some attention on the Philippines as a place to be reconsidered by international explorers.

Where to look

The Philippines is not an easy place in which to find hydrocarbons in commercial quantities. This is amply demonstrated by more than 100 years of effort having turned up only one really significant field.

Other smaller oil fields have been found offshore along northwest Palawan in the vicinity of Malampaya, commencing with the first important oil discovery at Nido in 1976. A handful of smaller fields were likewise found on this stretch of coast in subsequent years. However, in total the subject fields have only aggregated about 50 million bbl of production since 1979.

Locations in the Philippines of important surface indications and subsurface shows of oil and gas in wells are widespread across the island group (Fig. 1).

Based on farm-out brochures, company annual reports, and published maps, Fig. 2 illustrates some of the major hydrocarbon play areas and shows the location of nearly 100 undrilled, known oil and gas prospects and-or leads for significant structural or stratigraphic traps.

Many fruitless efforts have been made to find oil and gas in the Philippines. The failures may have stemmed from an inadequate understanding of the geology of the Philippines with respect to the development of reservoirs, complex and often misunderstood subsurface structural and stratigraphic problems, poor seismic data in the years before the 1970s-80s, and the lack of appreciation of regional geology itself.

This is said easily in hindsight. We learn as we go and as we grow. The author of this article has observed the exploration efforts in the Philippines for more than 40 years.

The Philippines provides an area with sedimentary rocks ranging from Late Cretaceous to Pliocene. Regional considerations are important. This has had a direct bearing on the nature and quality of reservoir rocks that have developed through time.

With respect to clastic reservoirs, it is apparent that those areas lying east of the Philippine rift zone (Figs. 1, 2) along the east part of the Philippines are areas of poor reservoir quality and characteristics. This relates to the proximity to the Pacific Ocean Plate and consequent rock provenance. Sandstones in this area tend to be dirty, argillaceous, and lithic wackes of various types filled with volcanic and basic igneous components. They do not make good reservoirs.

The farther west one goes from the eastern Philippines, the better reservoir quality of clastic rocks is apt to be. In a westward direction is found more evidence and remnants of Lower Tertiary and pre-Tertiary continental and lacustine deposits. In addition to better reservoir quality, the older strata appear to have had a better environment for the development of source beds for oil and gas. This relates to the development and breakup of a microcontinental terrain. This then favors areas such as Panay, Mindoro, Palawan, and the western Sulu Sea.

This does not preclude the presence of oil and gas in Tertiary strata in the eastern areas. Even there, one can find occurrences of Miocene sandstones that have exceptional porosity and have delivered significant flows of water on testing, for example Central Luzon.

However, overall, the Palawan area and other western sectors are seen to be a much better area for hydrocarbon discoveries.

Carbonates with better reservoir quality and characteristics are more widespread and perhaps the reservoir of choice if one can define where these are apt to occur, especially reef buildups. It is noted that Miocene limestone is the reservoir rock in the north at the San Antonio (Ipil) gas field in the Cagayan Valley. It is also the host at the small Libertad accumulation on northern Cebu in the Visayan region to the south.

The area off Palawan also seems to be the most prolific area of potentially hydrocarbon bearing reef and platform limestones, with an abundance of potential reef traps (Fig. 3).

Infrastructure helps

Natural gas is of little value without access to a market. This is true anywhere and especially in the Philippines.

The existence of a pipeline automatically defines a linear area of prospectivity to be searched, such as along the new Malampaya to Batangas gas pipeline. Numerous plays should be evaluated along the length of the subject pipeline, especially in the Mindoro Strait and areas south and southeast of Mindoro (Fig. 2). These areas are also the site of known hydrocarbon shows, and more favorable geology, as well as now having proximity to a pipeline.

Malampaya should demonstrate to all explorers, as well as the Filipino investment community, that natural gas converted to electricity is a very viable option to searching exclusively for oil. Exploration for smaller gas deposits closer to markets in Central Luzon (Manila, Clark, and Subic), the Panay basin (Iloilo), and the Cotabato basin (General Santos and Cotabato City) and the Gulf of Davao (Davao) are areas to be considered.

The fairly widespread electrical transmission grid of the Philippines also makes selected onshore, smaller prospects proximal to substations and transmission lines something to consider for new exploration on any of the major islands.

Malampaya is very large and quite significant, but it will not preclude a growing gap in the Philippines' ability to generate electricity versus the projected usage after 2004, according to National Power Corp. studies. There will be a growing window of opportunity for new electricity sources. Large-scale imports of liquefied natural gas from Indonesia will not fill this entire need.

A couple obvious areas

Reed Bank
In the South China Sea within the Philippines Exclusive Economic Zone is one area of interest for major gas exploration (Fig. 4).

It was identified in the early 1980s at Sampaguita 1 and Sampaguita 3A. Sampaguita 1 tested at rates of about 4 MMcfd of gas with condensate. Sampaguita 3A flowed at rates of about 10 MMcfd.

The large, seismically defined Sampaguita-Champaka feature has been estimated by some explorers to contain resource potentials ranging between 1 and 17 tcf, with a medium more likely resource potential of 5 tcf. Several other large features of similar aspect remain to be evaluated on the northern bank.

While this area was always of note to many explorationists, it was of little commercial value in earlier years. No one was particularly interested in a stranded gas deposit in the South China Sea 500 miles southwest of Manila. This has changed dramatically with the presence of a major gas pipeline to Luzon whose origin point at Malampaya field is only about 100 miles to the northeast.

Southern Tañon Strait

Sometimes one thinks there is not enough unexplored area left to consider in the Philippines.

The exact outline of Malampaya field (Fig. 5) is shown as an overlay example at the same scale as the map of the Southern Tañon Strait. For some 90 miles along the Southern Tañon Strait no well has been drilled. Yet it is known that this water area masks a Tertiary-filled, graben-like basin with up to 25,000 ft of sedimentary section.

Based on older seismic data, it can be seen to have several reef and structural features of the same areal extent as Malampaya.

Along its eastern margin on the west coast of Cebu are numerous oil and gas seeps and indications of oil and gas seeps and flows from onshore wells.

The Tañon Strait is a likely hydrocarbon kitchen and source area containing large untested structural and stratigraphic prospects and leads.

Different ideas, technology

A program is being planned for South Cebu onshore areas that will utilize slim hole drilling for wells less than 5,000 ft in depth.

These will be offsets, adjacent to known gas tests from wells drilled in the 1960s-70s when gas was of no interest on Cebu. In conjunction with this method of greatly reduced drilling costs, the utilization of minigenerators (1.0 MW and less) can provide economic opportunities.

A minimum of four such exploration plays has been identified. It is anticipated that in 2002 some of these prospects will be evaluated by the drill.

Imminent drilling

Offshore: Shell will commence to test before the end of this year the possible exploitation of an oil leg beneath the gas accumulation at Malampaya.

This will be done at a location on the northeast end of the field where a well will be drilled to about 10,000 ft and then kicked off horizontally to open about 1,000 m of the 60 m thick oil column. This oil column, if it can be successfully exploited, would open a resource potential of some 268 million bbl of oil in place.

Onshore: PNOC has announced its intention to commence drilling the Victoria 3 well in Central Luzon before yearend. This is a possible gas play on the large Victoria anticline.

Victoria 1, drilled by Amoco in 1979, flowed at a test rate of about 1 MMcfd of gas from a zone at about 4,400 ft. Victoria 2/2A, about a mile north of Victoria 1 and a mile south of the proposed Victoria 3, was drilled to a depth of 18,340 ft in 1989 and is the deepest well in the Philippines. It had untested gas shows in the shallower section, also.

PNOC has also indicated it would drill an appraisal well at an indicated gas discovery at Sultan sa Barongis in the Cotabato basin in 2002.

'Six pack to go'

Gazing in the "crystal ball," if Malampaya is to have an effect on future exploration programs, where might that be directed? Fig. 1 illustrates where the abovementioned PNOC onshore drilling will occur.

Of the many prospects that are possible to look at in the Philippines, if one is to focus on prospects in the western Philippines for reasons previously discussed, then it is not improbable that such a list might include prospects Crescent, Santa Monica, North Coron, Amity, Cherry, and Hippo (Fig. 1, see legend).

Many others are available and perhaps some more worthy than those picked for the "six pack" suggested here. However, those enumerated are all in interesting areas and possibly provide a balanced suite of lower risk exploration plays.

Summary

Malampaya has had a definite impact on the view of the exploration potential of the Philippines.

As it becomes better known, it will serve as a catalyst to renewed exploration activity in the Philippines. It will have a major impact as an economic resource playing a major role in the energy scene of the Philippines as well as a great saving in the future on the outflow of foreign exchange.

Acknowledgment

Thanks to colleagues in Manila with various entities that assisted in identification of the general location of prospects and leads throughout the Philippines. Those entities represented include Transasia Oil & Mineral Development Corp., Philodrill Corp., Petrofields Exploration & Development Co., Basic Petroleum & Minerals Inc., Oriental Petroleum & Minerals Corp., PNOC-EC, Pacrim Energy Ltd., and the Oil and Gas Division of the Republic of the Philippines' Department of Energy.

Bibliography

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Bureau of Mines and Geosciences, Ministry of Natural Resources, "Geology and Mineral Resources of the Philippines," Vol. 1 and 2, Manila, 1986.

Corby, Grant W., "Geology and Oil Possibilities of the Philippines," Technical Bull. 21, Republic of the Philippines, Department of Agriculture and Natural Resources, 1951, 363 p.

Durkee, E.F., and Pederson, S.L., "Geology of Northern Luzon, Philippines," AAPG Bull., Vol. 45, No. 2, 1961, pp. 137-168.

Durkee, E.F., and Hatley, A.G., "The Philippines: Is a second exploration cycle warranted?," OGJ, Jan. 18, 1971, 1971, pp. 86-89.

Durkee, E.F., "Oil, geology, and changing concepts in the Southwest Philippines (Palawan and the Sulu Sea)," Geol. Soc. Malaysia Bull. 33, November 1993, pp. 241-262.

Durkee, E.F., "Philippines Central Valley basin may hold carbonate and sandstone gas," OGJ, Apr. 26, 1999, pp. 67-70.

Durkee, E.F., "Giant Oil Potential in Block C-1, Chindwin Basin, Northwest Myanmar and South Cebu-NGP: A Poorly Explored and Under-Explored Oil and Gas Province, Visayan Basin, Central Philippines," Seapex Exploration Conference and Forum IV, Apr. 4-6, 2000, Singapore.

National Power Corp., "Power Development Program," unpublished document, Manila, 1998.

National Power Corp., annual reports and personal communication, Manila, 1998 and 1999.

Porth, Hans, and von Daniels, Curt H., "On the Geology and Hydrocarbon Prospects of the Visayan Basin," Geologisches Jarhrbuck Reihe B, Heft 70, Hanover, 1989, 428 p.

Sheldon, Robert A., "Stratigraphy and Petroleum Prospects of Southwestern Cebu, Philippines," AAPG Bull., Vol. 57, No. 7, 1973, pp, 1,343-47.

The author

Ed Durkee's first international exploration assignment was in the Philippines in 1956-59 in field geology and mapping the Cagayan Valley in northern Luzon. As a consultant he has been involved in most parts of the Philippines and has been a permanent resident of Manila and engaged as an exploration advisor and consultant in the Philippines and Australasia since 1993. He holds BS and MA degrees from the University of Wyoming. [email protected]