Oct. 10--Palawan basin.

After several months of delay, the consortium running Galoc finally managed to flow the field's first oil from one of its two wells at 10:45 am Thursday.

Production in the second well will commence in the next few days, after which the consortium will conduct further testing until flows are stabilized for long-term production.

Galoc was originally targeted to produce its first oil in April, but mechanical problems coupled with weather disturbances from the onslaught of typhoons pushed this schedule forward several times until yesterday.

The Galoc field is expected to produce 20,000 barrels of oil per day (bopd) in its first 90 days of commercial production and eventually stabilize at a rate of 17,000 bopd for the rest of 2008.

This is equivalent to 6 percent of the daily oil demand of the country, almost doubling local production of the commodity, which stands at about 23,000 bopd or 7 percent of total local requirements.

The project cost for the Galoc development was initially pegged at $86 million but contractual and operational delays have increased this to over $120 million as of July.

The project marks several other milestones for the country, including being the first to be undertaken in a decade and a half since West Linapacan, and the first offshore development in seven years since Malampaya.

But more than this, Energy Secretary Angelo Reyes said that production from the field will help lower the country's oil import bill and provide a boost to the development of indigenous energy sources.

"In a time of uncertainties in oil prices, this will benefit the country and make us less reliant on imported crude oil and save millions of dollars in importation cost," Reyes said.

The Galoc field was discovered in 1981 with further appraisal undertaken in 1988. The field was not developed at that time due to the combination of risks associated with the reservoir and low oil price. Since then, advancements in technology have both improved the capability of defining the reservoir and resulted in the need for fewer wells to access the reserves than previously necessary.

The current development was initiated in mid 2005 when the Galoc Production Company WLL farmed in to the existing Service Contract 14-C Galoc Sub-Block.

GPC, which holds a 58.29-percent interest in the Galoc field, is majority controlled by Netherlands-based Vitol Group with a 68.62-percent interest. The rest of the company is owned by Australian-listed Otto Energy with a 31.38-percent shareholding.

The reserve estimate for Galoc is approximately 10 million barrels based on an assessment made by GPC in 2006 for a two-well development.

However, an independent study commissioned by one of the Galoc consortium members found the field to contain a higher reserve potential at 41.9 million barrels of recoverable oil.

A second study conducted by the same firm, Singapore's Gaffney and Cline Associates, in late September increased the field's "proved" reserves by 64 percent, which provides confidence in a stronger, longer-term production profile, based on the Galoc's pilot well testing conducted in January.

Reserves at the "proved" level represents a 90 percent confidence level for extraction.

Despite the conflicting figures, Jeff Davison, GPC chief operating officer, said that assessment of the ultimate potential with a view to further development would be undertaken during the initial six months of production.

GPC's partners in the Galoc field include Australian firm Nido Petroleum Ltd with a 22.28-percent stake and local firms Philodrill Corp. with a 7.02-percent share; Oriental Petroleum & Minerals Corp. and Linapacan Oil Gas & Power Corp.; both with a 7.58- percent interest; Forum Energy Philippines Corp. with a 2.27-percent stake; Alcorn Gold Resources Corp. with a 1.53-percent share, and PetroEnergy Resources Corp. with a 1.03-percent interest. -- Euan Paulo C. Anonuevo

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