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Shell’s Retreat from Oil Site Downplayed

by  Emilia Narni J. David: BusinessWorld: Thursday, January 05, 2012

Shell Philippines Exploration B.V. remains interested in bidding for other oil and gas prospects even as it pulled out of one of its work sites, the Energy department yesterday claimed.

The government said the withdrawal of Shell from service contract 54B is to allow the firm to look at more sites in the country.

“Shell has expressed to the Energy department its continued interest in exploration opportunities in the Philippines and will bid for new areas,” said Energy Undersecretary Jose M. Layug in a text message.

He added “Shell is consolidating its exploration plans and pooling financial and technical resources for development of oil and gas in the Philippines.”

This, as Australian firm Nido Petroleum Ltd. announced on Tuesday that Shell Philippines Exploration withdrew from the consortium drilling in an area covered by service contract 54B.

Shell Philippines Exploration had a 45% interest in the area while Nido Petroleum had a 33% stake.

Yilgarn Petroleum Philippines Pty. Ltd. rounded out the consortium with a 22% interest.

Nido Petroleum now has a 60% stake and Yilgarn controls 40%.

Mr. Layug said there are no indications yet from Nido Petroleum if it will “farm-out” interest in the area to another firm.

Service contract 54B is near the non-commercial Gindara-1 well, which Nido Petroleum abandoned in June last year due to reportedly low quantities of oil.

The site had been estimated to hold two billion barrels of oil.

Just recently, the consortium finished undersea surveys of the area with the intention of seeking potential areas to drill.

Mr. Layug said Shell Philippines Exploration’s withdrawal was to minimize its liability.

“We understand that Shell Philippines Exploration’s withdrawal from service contract 54 is part of its risk management strategy given Shell’s current portfolio of acreages under service contracts and its proactive search and participation in the 4th Philippine Energy Contracting Round (PECR) for petroleum,” said Mr. Layug.

Shell Philippines Exploration could not be immediately reached for comment.

The new contracting round, launched in June last year, is hoped to bring in $7.5 billion in investments to the country.

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