AC Energy diversifying into upstream sector

Danessa Rivera (The Philippine Star) - August 19, 2019 - 12:00am

https://www.philstar.com/business/2019/08/19/1944553/ac-energy-diversifying-upstream-sector

MANILA, Philippines — Ayala-led AC Energy Inc. is diversifying into the upstream sector as it plans to continue the development of the oil and gas assets it acquired from the Phinma Group earlier this year, its top official said.

The Ayala power business is looking to take in a strategic partner in the future to make sure that it is able to address the development potential of the asset, AC Energy president and chief executive officer Eric Francia said.

“I think the idea is over time, we will bring in at least one strategic partner, most likely foreign. In all likelihood its gonna be foreign with experience, big balance sheet and expertise in oil and gas exploration,” he said.

Earlier this year, Francia said the company was studying its options on Phinma’s oil and gas assets since it is not a core competency of the Ayala Group.

But last month, AC Energy renamed Phinma Petroleum and Geothermal Inc. (PPGI) to ACE Enexor Inc. as part of the reorganization after it acquired the energy businesses of the Del Rosario family earlier this year.

ACE Enexor has two operating service contracts (SCs), namely SC 6 and SC 55.

Located in northwest Palawan, SC 6 is divided into two blocks where ACE Enexor owns a 7.78 percent interest in Block A and 2.475 percent carried interest in Block B.

Meanwhile, the company is the operator of SC 55, a prospect in west Palawan.

 “We made a disclosure last Friday where we mentioned that we will be going into the appraisal period and we are committing one appraisal well to really assess the commerciality of the resource,” Francia said.

The SC 55 consortium said it would proceed to enter Sub-Phase 5 starting Aug. 26, where it will be drilling one ultra deepwater well at the cost of at least $3 million.

The consortium has committed to drill one ultra deepwater well in the second quarter of 2020.

Australia-based Otto Energy Ltd., through Otto Energy Philippines Inc., the previous operator of SC 55, had already drilled the Hawkeye-1 well in 1,700 meters of water at a cost of $23.5 million.

“Otto led the drilling and there was gas in the area, but it was not commercial at least on the depth that they reached, but we’ve made further studies and reprocessed data with more advanced seismic interpretation. So hopefully we will see things that we haven’t seen before so we really want to maximize the potential of these exploration activities,” Francia said.

Meanwhile, AC Energy will focus on these two prospects first before participating in any government auction to develop the country’s oil and gas sector.

“For now, we will just focus on nurturing the two service contracts,” Francia said.

He said the company has conducted studies on the upstream sector’s potential and has found it under invested.

“If you look at the last decade or so, there was hardly any significant or meaningful exploration activities,” the company official said.

“The oil and gas industry is still awaiting the Supreme Court decision on the Malampaya case so we hope that will be resolved soon to provide more clarity in the industry because as you can imagine, it is an uncertainty that is hanging over everyone,” Francia said. 

The Department of Energy (DOE) launched Philippine Conventional Energy Contracting Program (PCECP) last November, which offers 14 pre-determined areas and the option for investors to propose their own exploration area, making oil and gas exploration a dynamic investment prospect for players in the energy sector. 

Presently, there are only 23 active petroleum service contracts in the country.

Among all contracts, the Malampaya deep water gas-to-power project is the most successful. As the largest natural gas industrial project in the Philippines, it recovered all costs in four years.