Petroleum Service Contracts

Nominated Area 10

An Opportunity for High-Yield Exploration in Northwest Palawan
On March 31, 2021, Service Contract 6A (SC 6A), which covers an area of 1,092.1 km² (109,210 hectares) in Northwest Palawan, was surrendered to the Department of Energy (DOE) after 12 years into its final 15-year term. This decision was made in preparation for applying a new Service Contract for the area. The decision to surrender the contract was driven by the impending expiration date, set for February 2024, alongside the challenges posed by the COVID-19 pandemic, severely disrupting the timely implementation of critical programs associated with SC 6A. Before this transition, the SC 6A Joint Venture (JV) had been focused on appraising the Octon Discovery for a potential tie-back to the Galoc oil field and had also been working on determining a drill location to test the Malajon-Salvacion-Saddle Rock prospect.

In March 2023, Philodrill, as the applicant, along with its joint venture partners Anglo Philippines Holdings, Forum Energy Philippines, and PXP Energy, submitted the bid documents to the Department of Energy (DOE) to re-acquire Service Contract 6A. The area has now been designated as Nominated Area No. 10 (NA 10) and has been expanded to cover 1,400 square kilometers (140,000 hectares). The application includes a comprehensive Work Program (WP) proposal aimed at further appraising the Octon discovery and exploring the hydrocarbon potential of the West Malajon Prospect. In November 2023, the DOE endorsed the pre-signed Service Contract to the Office of the President for approval and signature.

DPPSC Application (SC 6B)

The former Service Contract 6B expired in February 2024 and is currently under application for a Development and Production Petroleum Service Contract (DP PSC) with the Department of Energy. The area covered by the DP PSC is 9,173.2 km² (or 91,732 hectares) and is located in the Northwest Palawan Basin, approximately 40 km offshore from Palawan Island. Philodrill will hold a 17.4546% Participating Interest in the DP PSC once the contract is awarded, maintaining the same level of participation as in the previous Service Contract 6B.

The DP PSC includes the Cadlao field, which produced 11.1 million barrels between 1981 and 1991 from two subsea production wells completed in the Miocene age pinnacle karst reservoir associated with the Nido Limestone. Production from the field ceased in 1991 when output reached 940 barrels of oil per day (BOPD), which was accompanied by an 80% water cut. The Cadlao structure was initially drilled and developed using 2D seismic data. Technical evaluation of a 3D survey, acquired in 1996 and reprocessed in 2013, has indicated that the original wells left a significant volume of attic oil up-dip from the highest well on the structure. The remaining attic oil potential, along with rising oil prices, supports the viability of redeveloping the Cadlao Oilfield. Additionally, seismic mapping has identified several prospects and leads within the block, including the East Cadlao Prospect, which could potentially be developed as a tie-back to the Cadlao field.

Service Contract 14C1 – Galoc

Service Contract 14C1 (SC14C1) stands as the premier offshore oil production asset in the country, strategically located within the Northwest Palawan Basin and covering an area of 163.01 km2 (16,300.95 hectares). NPG Pty. Ltd. operates this contract, which is a critical component of the nation’s energy infrastructure. Philodrill holds a significant 10.18% participating interest in the joint venture, positioning it as the second-largest stakeholder after NPG Pty. Ltd., which maintains a majority share at 78.83%.

The Galoc oil field continues to be a reliable contributor to the country’s energy portfolio, marking its 16th consecutive year of continuous production. The field’s production output currently averages 1,200 barrels per day, affirming its ongoing value and viability. Since the field commenced production in October 2008, the field has now produced close to 24.93 million barrels of oil (MMBO) as of the end of 2024.

Service Contract 14C2 – West Linapacan

The West Linapacan Block covers an area of approximately 182 km² (182,000 hectares) and is one of three (3) service contracts, including Nominated Area No. 10, operated by Philodrill, holding a 28.070% stake in the joint venture. It is located in the Northwest Palawan Basin, 60 km offshore from Palawan Island, and is host to the West Linapacan A oil field (WLA) and West Linapacan B (WLB) oil and gas discovery in water depths of 350 meters.

The WLA field was discovered in 1990 and was developed in 1992, achieving a peak production rate of 18,700 barrels of oil per day from the highly fractured Oligocene-Early Miocene Linapacan Limestone. After producing 8.5 million barrels of oil, the field was shut-in in 1996 due to low oil prices - about $16.00 to $19.00 per barrel - and an increasing water cut. Recent studies of newly reprocessed seismic data indicate that there may be significant remaining oil deposits, which could justify redeveloping the field.

The WLB offers a valuable opportunity for appraisal. The WLB-1X well, drilled in 1993, tested for oil and gas but was temporarily plugged and abandoned by the previous operator. Since then, there have been no efforts to re-evaluate this discovery. With advancement in technology and changes in market conditions, a successful appraisal of the WLB could reveal additional resources and significantly benefit the redevelopment of the nearby WLA field.

Service Contract 53 – Mindoro

The Mindoro Block is situated on the island of Mindoro, covering an area of 7,240 square kilometers (724,000 hectares), with the majority being onshore. This block spans two significant basins divided by a suture zone: the South Mindoro Basin and the East Mindoro Basin to the east. The South Mindoro Basin is widely regarded as an extension of the Northwest Palawan Basin, which suggests potential for hydrocarbon resources. To date, two gas discoveries have been made and are awaiting appraisal: the Progreso and Cambayan prospects.

Philodrill is preparing to appraise the Progreso gas discovery in San Jose, Occidental Mindoro, with plans to develop it into a gas-to-power project. Meanwhile, permitting processes are underway in Bulalacao, Oriental Mindoro, in preparation for drilling a second well on the Cambayan Prospect.

Service Contract 53 is one of the three blocks operated by Philodrill. The company joined the joint venture in 2006 as one of the Filipino majority stakeholders and took over as operator in 2021, currently holding an 81.480% participating interest. Since 2012, the service contract has been under force majeure, awaiting the issuance of the Certification Precondition from the National Commission on Indigenous Peoples.

Pre-Determined Areas (PDA)-BP2 AND -BP3 (Sulu Sea)

Strategic Hydrocarbon Assets in the Sulu Sea Basin
Located within the resource-rich Sulu Sea basin, the Pre-Determined Area (PDA) – BP2 covers an area of 7,800 km² (780,000 hectares), while PDA – BP3 covers 5,320.83 km² (532,083 hectares). These offshore areas were opened for exploration by the Department of Energy and the Ministry of Environment, Natural Resources, and Energy (MENRE) of the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) during the First BARMM Conventional Energy Bid Round. Philodrill Corporation will hold a 12.5% participating interest in each of the two (2) blocks once they are awarded by the government.

PDA – BP2 is an area with significant gas discovery and exploration potential. Among the four recent wells drilled in this block, two resulted in significant gas discoveries. A third well yielded sub-commercial gas during testing. The two discovery wells demonstrated multiple gas reservoirs within Late Miocene turbidite sands, highlighting the untapped potential of the area.

In contrast, PDA – BP3 is a relatively underexplored yet promising area located immediately to the south of PDA-BP2 in this hydrocarbon-rich basin. Previous operators acquired extensive 2D seismic data and conducted two comprehensive 3D seismic surveys over approximately 1,600 km², revealing a range of attractive prospects and leads.

The broader Sulu Sea Basin has experienced limited exploration, with only 31 wells drilled throughout the region. Of the 16 wells drilled in the Philippine Sulu Sea (PSS), a notable 75% indicated hydrocarbon presence, with some producing both oil and gas during tests.

Summary of Participating Interest

OPERATED BLOCKS

ASSET

LOCATION

PARTICIPATING INTEREST

SC 53

(Mindoro)

Onshore Mindoro

81.4800%

SC 14C2

(West Linapacan Block)

Offshore Northwest Palawan

28.0700%

Nominated Area 10 (Octon Block)

Offshore Northwest Palawan

72.1662%

NON-OPERATED BLOCKS

ASSET

LOCATION

PARTICIPATING INTEREST

SC 14C1

(Galoc Block)

Offshore Northwest Palawan

10.17782%

DP PSC Area

(Former SC6B Bonita Block)

Offshore Northwest Palawan

17.45460%

PDA-BP-2 and PDA-BP-3

(Sulu Sea)

Offshore Sulu Sea

12.50000%

THE PHILODRILL CORPORATION

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