Document of The World Bank FOR OFFICIAL USE ONLY Report No. 8891 PROJECT COMPLETION REPORT PHILIPPINES PETROLEUM EXPLORATION PROMOTION PROJECT (LOAN 2201-PHL) JUNE 29, 1990 Industry and Energy Operations Division Country Department II Asia Regional Office document ha a rstictd diibution and may be used by only I the pefan ireefl their officra dutie Its contents may so oherwe be Bdio Wold bnk authokation. ABBREVIATIONS AND ACRONYMS ADB - Asian Development Bank BED - Bureau of Energy Development NPC - National Power Corporation OKA - Office of Energy Affairs in the Office of the President of the Republic PNOC - Philippine National Oil Company PNOC-EC - PNOC Exploration Corporation PNOC-EDI - PNOC Energy Drilling Inc. RP - Republic of the Philippines UNDP - United National Development Program THE W0U29ANK I NY Waston. D.4. 20433 U.SA. 0Mw. n tWet.G.wtu Opst.w' tlwift June 29, 1990 1EXORANDUM TO THE EXECUTIVZ DIRECTORS AND TBE PRESIDENT SUBJECT: Project Completion Report on Philippines Petroleum Ezploration Promotion Pro ect (Loan 2201-PHL) Attached, for information. is a copy of a report entitled Project Completion Report on Philippines Petroleum kxploration Promotion Project (Loan 2201-PHLP) prepared by the Asia Regional Office with Part II of the report contributed by the Borrower. No audit of this project has .been made by the Operations Evaluation Department at this time. Attachment Thisbdocument =haa dibutiundnmybeu d byc*olmatsonlyn do ps(WWW- of their officil du'eL Its contents may nototherwisebe d_in wklun Wo"EBank !cbrid FOR OFFICIA S ONLY PHILIPPINES PETROLEUM EXPLORATION PROMOTION PROJECT (LN. 2201-PH) PROJECT COMPLETION REPORT TABLE OF CONTENTS Pate No. Preface ...................................................... 1 Evaluation Summary .......................... ii PART I PROJECT REVIEW PROM BANK'S PERSPECTIVE Project Identity .................................................. I Project Background ......................................... 1 Project Objectives and Description........................ 2 Project Design and Organization............................ 2 Project Implem.entation.......... 3 Major Results of the Project .................4 Project Sustainability..................................... 5. Bank Performance........................................... 5 Borrower's Performance..................................... 5 Project's Relaiosip ...................... 5 Performance of Contractors and Consultants......... 6 Project Documentation and Data.... ata..... 6 PART II PROJECT REVIEW FROK BORROWER'S PERSPECTIVE Borrower's Perspective of the Design and Implementation and its Development Impact on the Project*3... 7 PART III STATISTICAL INFORMATION Related Bank Loans............... .......................... 43 Project Timale........................ 44 Loan Disbursements......................................... 45 Project Implem2entation..................................... 46 Project Costs and Financing. ........... ....... 47 Pruject Results............... ............................. 49 Status of Loan Covenants ..................... 0...... 0. . .. 51 Use of Bank Resourceso...................................... 52 MAP IBRD 16361 * This part has been prepared by the Borrower and its contents and opinions are not attributable to the Bank. Thisdocument,haaresz"kteokdaiubudon and may be usedbyreipients nly in d pofonn"s of thir officia uties. tscontents maynot otherwiebedisclosedwithoit World Bank autohndaon. PHILIPPINES PETROLEUM EXPLORATION PROMOTION PROJECT (Ln. 2201-PH) PROJECT COMPLETION REPORT PREFACE This is the Project Completion Report (PCR) for the Petroleum Exploration Promotion Project - BED component - in the Philippines, for which Loan 2201-PH in the amount of US$13.5 million was approved on September 30, 1982. The loan was closed on December 31, 1987, one year behind schedule. The loan amount, revised at government's request to $8.0 million, was fully disbursed and the last disbursement was in June, 1988. The PCR was jointly prepared by the Industry and Energy Operations Division of the Asia Regional Office (Preface, Evaluation Summary, Parts I and III), and the Borrower (Part II). * Preparation of this PCR was started during Bank's final supervision mission of the project in December, 1987, and is based, inter alia, on the President's Report (no separate Staff Appraisal Report was prepared); the Loan, Guarantee, * and Project Agreements; supervision reports; correspondence between the Bank and the Borrowers; and internal Bank memoranda. - ii - PROJECT COMPLETION REPORT PHILIPPINES PETROLEUM EXPLORATION PROJECT (Ln. 2201-PH) EVALUATION SUMMARY Objectivess The Petroleum Exploration Promotion Projects (Loans 2201 and 2202- PH) were designed with a view to rekindling the interest of oil companies in exploration for oil and gas in the Philippines, and the extension of exploration activities to relatively unexplored offshore areas. Two borrowers were involved. the Republic of the Philippines for offshore areas and some unlicensed onshore areas and the Philippine National Oil Company (PNOC), which had control of most onshore areas. This report deals with the successiul exploration promotional effort carried out by the Bureau of Energy Development (BED) in the Ministry of Energy and the successor to BED, the Office of Energy Affairs (OEA) in the Office of the President. The strategy adopted for the project was to enhance the country's geological data base and to develop new exploration policy concepts through a nationwide basin evaluation exploration program. The results of the basin studies were to be contained in a promotional report which the Government would use in an active promotional campaign to revive international interest in petroleum exploration interest in the country. Implementation Experience: The project implemented consisted of the aeromagnetic survey of the offshore and onshore sedimentary basins over most of the Philippine archipelago except in the Sulu Sea and Palawan with 215,844 line km of data acquired, processed and interpreted; seismic survey over offshore areas not surveyed in the past with 9,104 line km profiled, processed and interpreted; regional basin evaluation studies carried out in 15 offshore and onshore basins, incorporating old and new data and a promotional package developed; and training to upgrade the technical capability of the Filipino staff involved in the project, to be completed through foreign training or short-term local courses in the Philippines. The project largely depended on foreign contractors and consultants for its technical execution. The need was to define precisely the job content of the contracts to be let and the terms of reference for consultants. Bank professional staff provided useful assistance in this work. - iii - Results: Being an exploration promotion project, no economic or financial analysis of the project was made at appraisal. The project objective was, however, achieved in that five exploration contracts have been concluded and more will follow. Nine out of the 15 basins promoted apparently have been found attractive. The contracts typically provide for oil companies to carry out geophysical work, basically reprocessing of seismic data and interpretation, expending certain stated minimum amounts. Drilling options are thereafter available and after one or two wells are drilled, the next stage would lead to signing of service contracts for production and production sharing. Incentives for participation by Filipino partners with foreign oil companies are built into the service contracts. Sustainabilitys This type of project has a ripple effect and how far the ripple will spread is a function of the success of the promotion (which has been achieved) and ultimately of the companies" finding commercial hydrocarbons. The information gathered, however, establishes that there is a high probability of moderate hydrocarbon finds of a commercial nature. Findings and Lessons Learned: Fluctuations in oil prices during this period had created considerable uncertainty in the international oil industry and so the international promotional campaign was planned with care and deliberately delayed to the middle of 1987. The formulation of the terms for exploration were done taking into account the considered views of the Bank professionals to ensure a wide response. The fact that 43 promotional reports were sold, 14 companies applied for various areas and 5 exploration contracts signed as of 1989, is indicative of a successful, well planned campaign. The association of BED staff in the basin evaluation program carried out by the contractor's and consultants provided a great opportunity for local staff to hone their skills and turn into synergistic explorationists. OEA would, therefore, be well advised to address itself to the important question of the country benefitting technologically by associating both its own trained staff and that of PNOC, with the oil companies through the various stages of exploration, development and production activities. In particular, this is a unique opportunity for PNOC-EC, with its corps of trained geoscientists and drillers, to seek to participate with the oil companies when service contracts are signed and vigorous exploration by the foreign oil companies of offshore resources is pursued. Any risk investment which PNOC-EC has to make until the exploration wells establish commerciality of hydrocarbon finds is not likely to be large and in participating with several oil companies such risks are spread out. THE PHILIPPINES PETROLEUM EXPLORATION PROMOTION PROJECT (LN 2201-PH) PROJECT COMPLETION REPORT PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE 1. Project Identity Name Petroleum Exploration Project Loan No. s 2201-PH RVP Unit t Asia Region Country : Philippines Sector Energy 2. Project Background 2.01 The Philippine energy situation is characterized by a heavy dependence on imported oil (58Z of total and 701 of conventional energy in 1987) and limited activity in exploration and development of indigenous resources. Proven oil reserves amount to only 4 million tons. Potential coal reserves amount to 1,500 million tons, but most of it is low grade and is expensive to mine. Hydro resources are substantial, with a potential of over 10,000 MW, but the sites (except for the few developed) are far from the grids and too costly to develop. Geothermal resources are abundant, a possible 8,000 MW, about 894 MW of which have been tapped and much more to be developed in the near term. With a view to assisting the Philippines to exploit its indigenous potential, the Bank extended four loans in FY82 and FY83, one for coal exploration, one for geothermal exploration and two for petroleum exploration promotion. A second Bank loan for a geothermal power project approved in FY88 includes provisions for appraisal and delineation of several geothermal fields. 2.02 The Petroleum Exploration Promotion Projects (Loans 2201 and 2202-PH) were designed with a view to rekindling the interest of oil companies in exploration for oil and gas in the Philippines, and the extension of exploration activities to relatively unexplored offshore areas. Two borrowers were involved, the Republic of the Philippines for offshore areas and some unlicensed onshore areas and the Philippine National Oil Company (PNOC), which had control of most onshore areas. This report deals with the successful exploration promotional effort carried out by the Bureau of Energy Development (BED) in the Ministry of Energy and the successor to BED, the Office of Energy Affairs (OEA) in the Office of the President. 2 2.03 The project under review had an overall cost of $9.5 million, about 412 less than the appraisal estimate of $16.0 million due to the lower than expected cost of the aeromagnetic and offshore seismic surveys, owing to the recession in the petroleum industry during the period. Disbursement of the Bank loan was consequently lower than envisioned, at $7.79 million against a loan amount of $13.5 million. This was foreseen early in the project, and the Government and Bank agreed to cancel $4.5 million of the loan amount in May 1984 and $1.0 million in June 1985. 3. Prolect Description and Objectives 3.01 The strategy adopted for the project was to enhance the country's geological data base and to develop new exploration policy concepts through a nationwide basin evaluation exploration program. The results of the basin studies were to be contained in a promocional report which the Government would use in an active promotional campaign to revive international interest in petroleum exploration interest in the country. The project was identified in the course of discussion with the Government in late 1981 and firmly defined by February 1982. The project as appraised consisted of the followings - Aeromagnetic survey of the offshore and onshore sedimentary basins over most of the Philippine archipelago except in the Sulu Sea and Palawan with 168,000 line km of data to be acquired, processed and interpreted; - Seismic survey over offshore areas not surveyed in the past with 8,400 line km to be profiled, processed and interpreted; - Regional basin evaluation studies to be carried out in 15 offshore and onshore basins, incorporating old and new data and a promotional package to be developed; and - Training to upgrade the technical capability of the Filipino staff involved in the project, to be completed through foreign training or short-term local courses. 4. Project Design and Organization 4.01 The project largely depended on foreign contractors a-id consultants for its technical execution. The need was to define precisely the job content of the contracts to be let and the terms of reference for consultants. BED's own geoscientists, assisted by Bank staff, performed this task effectively. Consultants also assisted in supervising the work of contractors, assistance which proved to be particularly useful. The project was well timed as advantage could be taken of the buyer's market prevailing at the time. The project *quantities, had to be increased slightly in the light of actual conditions during implementation. This was anticipated and not unusual in this kind of work. 3 5. Prolect Implementation 5.01 Aerm anetic surveys: Questor Surveys, Inc. of Canada was asked on December 3, 1982 to mobilize and the first survey line was flown on January 18, 1983. The acquisition was completed in April 1984, and the final contour and color maps were delivered to BED by end of September 1984. This was six months later than expected due to % 252 increase in coverage (to 215,844 kms) poor weather conditions caused by typhoons and storms, mechanical problems with the survey equipment and aircraft, and the crash of one of the two aircraft in April 1983 (which was replaced by another in June 1983). International Exploration Inc. of the United States (Intex) assisted BED in the planning of the aeromagnetic survey, supervision of data acquisition as well as data analysis. interpretation, and the preparation of reports. Intex prepared the last of the depth-to-magnetic basement maps during January 1985, at which time the project was about seven months behind schedule. 5.02 Offshore seismic survey: Seiscom Delta United International Corp. (SD) of United States commenced acquisition of seismic data on April 25, 1983. By September 14, 1983, 9104.35 line km of seismic profiles had been gathered over 15 offshore areas. Processing of 1,084 kms (a representative sampling of lines in each survey area) was done at Seiscom Delta's center in Australia in October 1983. The bulk of the remaining marine data was processed at PNOC's seismic data processing center, which began operating in May 1984, according to a priority schedule by area and by lines within each area. The offshore seismic coverage was augmented by 4,770 line km of infill seismic data gathered by the Petro-Canada International Assistance Corporation on a grant basis to the BED over selected offshore areas. Although processing was delayed by about six months to await establishment of the PNOC pt -ess center, this did not delay the exploration promotion which took place in S.- ;ember 1987. 5.03 Regional basin evaluation: Robertson Research - Flower Doery Buchan of Australia (RR) was selected as the consultant for the basin evaluation studies as well as for the supervision of the offshore seismic program. RR was in position by late-1982 in anticipation of the signing of the contract on May 19 1983 to provide 56 man-months of consultancy services until 1984. However, 21 additional man-months had to be added in 1985, 4 in 1986 and 3.5 in 1987 due to delayed implementation of some components, e.g., aeromagnetic data acquisition and setting up of PNOC seismic processing center. Also, in the course of implementation of the basin evaluation studies, the NW Palawan and Reed bank areas were subsequently included, on relinquishment by service contractors. RR committed three experts on a continuing basis and a number of specialists on short-term assignments; 18 geologists /geophysicists from BED worked closely with the RR personnel in a pool which catered to a synthesis of geology, geophysics, geochemistry, sedimentology, paleontology, micropaleontology, cartography, petrography, biostratigraphy, and seismostratigraphy. The result was a comprehensive geological analysis of 15 onshore and offshore sedimentary basins and sub-basins. The final product is contained in a comprehensive promotional report in 12 volumes of text and atlases. 5.04 Project promotion: This was the most critical phase of the project as the fluctuations in oil prices during this period created considerable uncertainty in the international oil industry. The promotional campaign was 4 planned with care and was deliberately delayed to the middle of 1987, when the international oil industry recommenced expressing interest in foreign exploration. The formulation of terms for exploration were done, taking into account the views of the Bank to ensure a wide response. First, an introduction to and a preview of the promotional presentation to take place in September 1987 was given in different foruims. The promotional presentation was then made at Manila, Houston, Calgary and London. Seventy companies attended the different presentations. As of November 1988, 43 report sets had been subscribed to and 14 companies had applied for/expressed interest in 14 exploration areas. Contracts had been signed or were about to be signed with five of these companies. Five others were under negotiation. 5.05 Training: BED engaged the International Human Resources Development Corporation (IHRDC) to run 10 courses of one-week duration each in Manila for the benefit of BED and PNOC technical staff. There was also a course on "Economic Evaluation of Petroleum Exploration and Development Projects" for senior staff members. The valuable association of BED staff in the basin evaluation program carried out by Robertson Research also provided a great opportunity for the former to hone their skills and turn into synergistic explorationist.:. Although several of the staff have since left BED, it appears that most of them are within the country working for PNOC or private oil companies. 5.06 The loan closing date was extended by one year to December 31, 1987 primarily to carry the project through .t>s logical cycle up to the presentation to the oil companies. 6. Maior Results of the Proiect 6.01 Being an exploration promotion project, no economic or financial analysi? of the project was made at appraisal. The project objective, however, has been fully achieved in that five exploration contracts are being concluded and more will follow. Nine out of the 15 basins promoted apparently have been found attractive. The contracts typically provide for oil companies to carry out geophysical work, basically reprocessing of seismic data and interpretation, expending certain stated minimum amounts. Drilling options are thereafter available and after one or two wells are drilled, the next stage would lead to signing of service contracts for production and production sharing. Incentives for participation by Filipino partners with foreign oil companies are built into the service contracts. These incentives allow 7.5Z of gross revenue to the oil companies so long as the Filipino participation is at least 302, with downward adjustments for lower participation. This is a laudable provision and it is to be hoped that the Filipino participation would result in technology transfer from the oil companies. 6.02 This is also a unique opportunity for PNOC-EC, with its corps of trained geoscientists and drillers, to seek to participate with the oil companies when service contracts are signed and vigorous exploration by the foreign oil companies of offshore resources is pursued. Any risk investment which PNOC-EC has to make until the exploration wells establish commerciality of hydrocarbon finds is not likely to be large and in participating with several oil companies such risks are spread out. Further, PNOC-EC should be in a position to offer 5 services to the oil companies, for example of its seismic processing center, and earn some income. OEA would be well advised to address itself, seeking the guidance of the Energy Coordination Council, to the important opportunity for the country to benefit technologically by associating with the oil companies through the various stages of their exploration, development and production activities. 7. Project Sustainability 7.01 This type of project has a ripple effect and how far the ripple will spread is a function of the success of the promotion (which has been achieved) and ultimately of the companies' finding commercial hydrocarbons. Probabilities can be worked out and intelligent guesses made of likely quantities and financial returns but this would be time consuming and still only a 'probability". The information gathered has established that there is a high probability of moderate hydrocarbon finds of a commercial nature. 8. Bank Performance 8.01 At project origin, the Bank advised BED to consider undertaking an aeromagnetic survey, followed by seismic surveys of the offshore on a selective basis. The project was des.gned, with BED and the Bank working together towards the objective of 4eveloping promotional packages to interest oil companies in exploration. This interaction was maintained throughout the project as the * promotional campaign was developed and implemented. Through eight supervision missions, the Bank assisted BED in overseeing the work of contractors and consultants and ensuring that problems were prevented or solved. Bank staff reviewed the draft promotion package and offered useful comments. The Bank also contributed to the formulation of the terms of the contracts to ensure wider industry participation. Apart from the financial assistance of the loan, the Bank made a substantial direct technical assistance. This project demonstrates that, more than through financial assistance, the Bank could play a significant role in opening up a country for exploration (of hydrocarbons in this case), if there is a judicious mix of technical input by Bank staff and inputs from consultants. 9. Borrower's Performance 9.01 BED/OEA displayed a strong commitment to the Project. At all stages f- a conception to completion, the uzge to succeed was noticeable. contractors/consultants and the Borrower's staff maintained cordial relationships and the cooperation was of mutual benefit. BEDIOEA has had competent managers who could use to good effect external financial and technical resources when necessary and available. 10. Project Relationship 10.01 Relationships among the various project participants - the Bank, BED and contractors/consultants, were extremely amicable, which helped to achieve smooth project implementation. 6 11. Contractors and Consultants' Performance 11.01 In general, all contractors and consultants performed well. In the aeromagnetic survAy, Questor's recordings were within the tolerance levels and diurnal variances. Line positions and flight elevations were well controlled. Intex, in controlling the quality of the survey, in interpreting the data and preparing the depth-to-magnetic-basement maps warranted a good rating. Seiscom Delta United retorded offshore seismic data with resolution which was optimal, indicating employment of an airgun source which was well tuned and stable. The data processed by them indicated the use of advanced software with flexibility. Seismograph Service Corporation, which assisted PNOC-EC to set up the seismic processing center and helped in processing an initial 3,000 line km of marine data, go' the center going efficiently after a few teething problems and provided quality. rhe inputs from Robertson Research, assisted by Flower Dorey Buchan, were coI -.cive to good results as evidenced by a thorough basin evaluation and presenta.ion to the industry. The satisfying common denominator in all of the consultants' work was that Filipino staff could participate fully in the activities and benefit by the association. 12. Project Documentation and Data 12.01 A staff appraisal report had not been prepared for the project, but the President's report was detailed enough on the technical descriptions. The legal documents were clear. The supervision reports and the progress reports from the Borrower have been exhaustive. -7- THE PHILIPPINES PETROLEUM EXPLORATION PROMOTION PROJECT (LN 2201-PH) PROJECT COMPLETION REPORT PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE The Office of Energy Affairs in the Office of the President, Republic of the Philippines prepared Part II of the Project Completion Report of this project in June 1988. L 8 - I. SUMMARY 1 II. HISTORICAL RETROSPECTIVE 2 A. Introduction 2 S. Project Background 3 C. Project Objectives and Description 4 !II. PROJECT IMPLEMENTATION 5 A. Achievement of Project Objectives 5 S. Project Management 11 C. Project Cost and Financing Plan 12 D. Procurement 12 i) List of Major Contracts 12 ii) Performance of Contractors 13 iii) Performance of Consultants 15 E. Disbursements 1l IV. INSTITUTIONAL PERFORMANCE 1l A. Performance in Complying with Covenants 16 S. Meeting Institutional Goals 17 V. FINANCIAL PERFORMANCE 17 VI. CONCLUSIONS 17 -9- A. AEROMAGNETIC SURVEY COVERAGE B. OFFSHORE SEISMIC SURVEY COVERAGE C. SEDIMENTARY BASINS OF THE PHILIPPINES D. LIST OF TRAINING COURSES E. PROMOTIONAL TEAM F. PRESENTATION AGENDA G. PARTICIPANTS TO THE PRESENTATIONS H. SUBSCRIBERS TO THE PROMOTIONAL REPORT I. LOAN PROCEEDS J. LIST OF MAJOR CONTRACTS K. OBLIGATIONS FROM LOAN PROCEEDS L. OBLIGATIONS FROM GOP COUNTERPART -10- r . SlJlW:UHMARY' The Petroleum Exploration Promotion Project was 'oricei.vei a-. a rin;nc i a. an d tehni c a 1 ;it.in c to s!uppor tt h * elfort-z of the Government of the Philippines in its ir,4ie to d'eveiop indiqeno)u!-s energy resources andi att.ain zeir- zuffficiency in energy. The sttrategy adopted was to enhance the country'.: gaeological data base ant tievelop new exploration piay concepts through a nationwide bas-in evaluation program. The results of the basin studies ohall be containedi in a promotional report which the Government will use in an active promotional campaiqn to revive petroleum exploration interest in the country. The objectives of the Project were: (a) to rekindle petroleum exploration interest in the country and (b) to strengthen the technical capabiiities of the implementing agencies. The Project consisted of four components: (a) nationwide aeromagnetic survey, (b) offshore seismic survey (c; regional basin evaluation studies, and (d) training. Complementing the Project was a grant from Petro-Caanda international Assistance Corporation (PCIAC) which acquired and processed additional seismic lines in selected offshore areas. During the implementation of the Project it was agreed that the aeromagnetic survey be expanded to include other onshore areas. The basin evaluation studies also included areas which were recently relinquished by service contractors. Despite the additional coverage to some of the Pr3ject components, it became apparent that not all the loan funds of US$13.5 million would be required. In 1984 and 1985 the Government requested the cancellation of $4.5 million and $1.0 million, respectively. Thus, only US$8.0 million was uiltimately committed to finance the whole Project. The resuits of the Project are contained in 70 sets of a 12-volume report which consists of a project summary, .ix volumes of text and appendices, four atlas volumes and one suppiement. The report presents the conclusions and significant results of the basin evaluation program. New petroleum play concepts have been developed and old ones expaefed upon to provide the explorationist with a wide variety of untested or inadequately tested objectives. A promotional campaign was carried out in September 1987 in Manila, Houston, Calgary and London where - tw.o-tiay presentations were conducted before representatives of the oil industry. A complete set of the report was also displayed in these places for perusal of the presentation participants. As of Juine J1s8, 36 report sets have been sub-cribed to ana 7 companies have applied for 9 exploratinn area,--. - 11 - rhe Project as a whoLe succeeded in making a natironwide evaluation of the petroleum potential of the country . s sedimentary basin, both onshore anid offshore. it also was an effective mechanism of training the Filipino technical staff involved in the Project. Applications for petroleum contracts have started to come in and it is anticipated that dirilling activities will increase i n the very near future. II. HISTiORICAL RETROSPECTIVE A_X JQtCodQ£tjQQ The Philippines, just like many developing countries, is highly dependent on imported energy. In 1973 the country was importing 92% of its primary energy requirements mainly in the form of oil while the rest wpere supplied domesticall Y by hydropower, nonconventional energy resources such as bagasse and some coal. The abrupt spiralling of oil prices starting in late-1973 proved to be specially critical to oil-importing countries which exposed them to geopolitical turbulences that occur in the major oil producing region the middle East. The Philippine government in reaction to the implications on the security and economic development of the country of such escalation of oil.prices embarked on a national policy of self-reliance on energy. An integrated energy policy was formulated to (a) ensure adequate, stable and secure supply of energy, tb) to promote effective management of energy demand and (c) to safeguard environment in the pursuit of these energy activities. rhe national energy program remqired (a) the diversification of the commercial and geographical sources of imported energy for the country (bi accelerated development of indigenous source of energy resulting in the reduction of dependence on oil as primary energy source. (c) promotion of energy demand-management and energy conservation, (d) development of Filipino technical and financial capability in energy technology and (e) preservation and protection of the environment. By the mid-1970's appropriate legislations have been enacted to encourage the exploration and development of indigenous energy resources such as petroleum, coal and .geothermal through the production sharing scheme. Presidential Decree No. 87 enacted in 1972 served as the institutional fvamework which covers all activities reLated to the exploration, dievelopment and production of - -) petroleum. This aiiowz the participation oF technically and financially qualified foreign companies to participate in upstream petroljeAu activities while upholding the .iovereignty of the state over the energy resources. The resuit was an upsurge in petroleum drilling acti.vities in the country specifically in the offshore where several major multi-national companies undertook extensive qeophysical surveys and geological studies. In early 1976, the first significant offshore oil discovery was made at the Nido-1 well in. NW Palawan from Lower Miocene reefal and in the same type of petroleum play resulted in a few more oil and gas discoveries wells. In 1979, the first commercial oil production in the country went onstream from the Nido Complex under a service contract with Philippines - Cities Service Inc. (PCSI). This was followed in 1981 by the Cadlao Field of Amoco and in 1982 by the Hatinloc Complex also of PCSI. The three oilfields are of modest sizes and as of end 1987 have produced a cumulative total of 33.8 million barrels of oil. The oilfields are typical of Tertiary limestone reservoirs in Southeast Asia, very high initial- productivity but with corresponding high rate of depletion. Several other oil and gas discoveries have subsequently been found, mostly in offshore NW Palawan but most prove to be non-commercial or located in very deep water. The relatively active exploration activities in the late 1970's and the very, early 1980's which thereafter steadily declined starting in 1983 was influenced primarily by no new significant discoveries that followed after Nido, Cadiao and Matinioc. Similar activities in the exploration and development of other forms of indigenous energy reseources were implemented from the mid-1970's to the early 1980's. By 1987 domestic'energy resources were contributing 37% of the country's energy requirements. These came primarily from nonconventional energy resources, hydropower, geothermal, oil and coal. In May 1981, the Philippine Government through the Bureau of Energy Development (BED) of the Ministry of Energy (McE) developed a proposal to the World Bank for possible financial assistance for a -f zbQ2sZnzbQrP sESijryt_..sMrY-gg r2i The program will concentrate in areas not covered by Petroleum Service Contracts and will include deep water areas as well. It was hoped that with the generation of seismic data in areas considered to be - 13 - "high risKs", enough exploration interest will be generated amongst foreign oil expioration companies. In ict.oter 1*X81, tJorld Bank officials (Messrs. McCarthy and Fallen-- Sailey) who were in Manila during the 2nd ASean Council on Pe?troleum (ASCS)PE) Conference and Exhibition met with BED officiais and recommended that a _qr!2LnA tig :uryey be conducted first before the seismic survey program is initiated. During a two-week visit starting in November 5, 1981 a World Bank Mission accompanied by two (2) aeromagnetic consuitans discussed BED's project proposal as well as the petroieum and geothermal programs of PNOC. It was agreed that the BED project shall include an aa u over selected land areas and a over areas with data gaps. For three (3) weeks in February 1982, another World Bank Mission visited the BED and finalized the work program as follows: 1. Aeromagnetic survey totalling 168,000 line-km. 2. tffshore seismic survey comprising 8400 line-km. 3. Nationwide petroleum evaluation of sixteen (16) Philippine sedimentary basins for a 2-year' period involving foreign consultants. Negotiations for the BED and PNOC petroleum projects were held in Washington D. C. from 6-13 July 1982. The BED loan component (Loan 2201-PH) amounted to $13.5 million while that of PNOC (Loan 2202-PH) was $24.0 million. The loan agreement was formally signed on 28 October 1982. c-: p The Philippine Petroleum Exploration Promotion Project was iesigned to rekindle petroleum exploration interest in the country as well as extend exploration activities to relatively unexplored onshore areas. It also aimed to strengthen the technical capabilities of the two implementing agencies, BED and PN.C. The BED component of the Project consists of (a) a nationeide aeromagnetic survey of 168,000 line-kms, (b) offshoA seismic survey of 8,400 line-kms, (c) regional basin evaluation of about 15 onshore and offshore sedimentary areas and (d) a training program for the Philippine staff involved in the Project. A brief description of these components follows: (i) the _ tj_QiMWI.agfrgggr;gy_ry component was to be carried out in the onshore and offshore sedimentary basins, excluding the more obvious -14 economic basement areas, over most of the Philippine archipelago excePt in the SuILu Sea and Palawan. The initial phase entailed a brief review of available information on Philippine sedimentary basins and the outlining of the areas to be covered by the aeromagnetic survey. The second phase required the determination of the various parameters to be applied in the conduct of the survey while and the third phase included the supervision of the survey as well as the processing and interpretation of the acquired data. (ii) The Qfttf. Qr%_%Pj$.jQ5i_1iy component of the Project was designed to gather information over offshore areas with data gaps, i.e., areas with no industry coverage. A similar work methodoiogy as that in the aeromagnetic survey was adopted for this component of the Project. (iii) The r 9gj1_b2qz_*y1 _Z were to the carried out in fifteen (15) onshore and offshore basins or sub-basins by incorporating the newly- acquired aeromagnetic and seismic data with previous exploration information. The results of the evaluation will be contained in a promotional package which will made available to oil exploration companies. (iv) The ttria t was meant to upgrade the technical capability of the Filipino staff involved in the Project. This was to be completed through foreign training or short term courses. 1tI. PROiJECT IMPLEMENTATION A. o The loan agreement was formally signed on tictober 28, 1982 but Preparations for the start of the aeromagnetic and zeismic surveys and consulting services had been made earlier to take advantage of the good weather window. Signing of contracts with the various contractors and consultants was slightly delayed pending the approval by various Philippine government agencies but work on the various components of the Project proceeded nevertheless to adhere as much as possible to the timetable initially agreed upon between the BED and the World Bank. - 15 - Modifications to the work program with concurrence trom the Worltd Bank, had to be made in the course of implementation of the various project components when it was teit that Aui:h changes would improve the overal.. result*+ of the Projec t. 1 . N jt.XQQ idQ6{rQm%gtg$;c Ore- The or iginal program was to carry out 18, 522 line-km out in the course of the survey it was agreed to add another 25% coverage. Notice for the contractor, Questor Surveys, Inc. of Canada, to mobilize was issued on 3 December 1982 and after test flights the first survey line was-flown on 1 January, 1983. Data acquisition was comPleted, including reflys, on 9 April 1984. Final aeromagnetic survey coverage after measurements from flight paths amounted to 215,844 line-km. rhe duration of aeromagnetic data acquisition went beyond the timetabie due primarily to inclement weather conditions (typhoons and storms), frequent diurnal disturbances, mechanical problems with the survey equipment and aircraft. and the crash of one of the two aircrafts in April 1983. The latter necessitated a replacement aircraft which arrived in Manila from Canada in June 19, 1983 which was immediately refitted and flew its first mission in June 28. International Exploration, Inc. (INTEX) of Phi1adelphia, U.S.A. assisted the BED in the planning of the aeromagnetic survey, supervision of data acquisition as well as data analysis, interpretation and the final reports. The coverage of the aeromagnetic survey is shown in Annex "A". 2. The Q-ttiQrt-2attilic-auu This project component was advertised in three (3) foreign publications and one local newspaper on August 18, 1982; The winning bidder, Seiscom Delta United (Int'l.) Corp. was chosen with the concurrence of the World Bank based on technical and financial criteria. The contract was signed on 07 July 1983 but Seiscom Delta was given the formal notice to mobilize on April 22 and data acquisition started on April 25 to take advantage of the good weather months. The survey was completed on 14 September or over a period of 4.77 months and 9104.35 line-km of seismic profiles were gathered over 15 offshore areas. some programmed iines were cut short or not shot when initial shipboard monitors indicated very shallow basement or thin sedimentary eq4uences over some areas. Additional profiles were acquired in areas with thick sedimentary till. Tho tdata gathering phase of the survey was supervised by consultants from Robertson Research (Australia). Processing of some .000 line-km of seismic field data was done by Seiscoin Delta in Melbourne, Australia. The bulk of the data was processed by PNOC using their newly-installed VAX/780. The processed data which was done on an area by area basis was immediately interpreted and incorporated in the basin evaluation studies. The offshore seismic data coverage was augmented bY 4770 line-kms of infill seismic data gathered by Petro-Canada International Assistance Corporation (PCIAC) on a grant basis to the BED over selected offshore areas. Annex e" shows the final coverage of the offshore seismic survey. 3. The o jg ij giL jtX entailed a multi-disciplinary synthesis of all available exploration data, including the newly acquired information under the Project. The result is a comprehensive geological analysis of 15 onshore and offshore sedimentary basins and sub-basins. The petroleum potential for each sedimentary basin was evaluated and the basins were ranked in order of prospectivity. The final product iz contained in a comprehensive promotional package or report which will be made available to interested oil exploration companies. Annx 'C' indicates the sedimentary basins and _b-basinm covered b the evaluation studies. The basin evaluation studies required the services of experienced consultants and for these bid invitations were sent out to several consulting firms. The letters of bid invitations were sent out mid-August 1982 and by 1 October six (6) responses were received. Evaluation of the bid tenders was completed an 22 October and Robertson Research (Australia) - Flower Doery - 17 - euctan (Australia) wax selected and recommendedj as the consultant for the basin evaluation studies as well as in the supervision of the oftshore seismic survey program. The contract for consultancy was signed on 19 may 1I.9E but even Previous to this some consuitants have already started working on the Project in preparation for the offshore seismic survey. The contract was initially for a period of 5w-man- months of consultants for the programmed 2-year duration of the Project (1983-1984) including consultancy time rendered in late 1982. However, delays in .the implementation of some of the components of the project, e.g. aeromagnetic data acquisition and setting up of the PN.jC Seismic Processing Center, affected the pace of the interpretation of the aeromagnetic and offshore seismic data. In the course of the basin evaluation studies, the NW Palawan and Reed Bank areas were subsequently included in the coverage since these areas were gradually being relinqjished as service contracts during the duration of the Project. The extension of the completion date of the Project was also influenced by the level of world-wide petroleum exploration which in 1985 and 198% experienced a downturn in drilling activities. A collapse in crude oil prices in early 1986 also greatly affected the timing of the promotion of the project report. In the domestic front, the economic and political situations prevailing in the Philippines in 1984 and 1985 were marked by uncertainties. Prospects for improved stability became discernible thereafter with the change of government after February 1986, coupled with the ratification of a new Philippine Constitution in early February 1987, and the holding of congressional elections in Hay 1907. There was a marked improvement and stabilization of oil prices towards the end of 1986. The promotion of the Project was finally programmed for the 3rd quarter of 1987. The several extensions given to the completion oi the basin studies offered more time to undertake detailed and exhaustive evaluation of the various basins. The result is a comprehensive promotional report consisting of 12 volumes of text and atlases. The sedimentary basins were - 18 - rated in order of pstroieum pro-.pectjvity. F.n each basin, petroleum Play concepts both old and new, have been developed anti amplified and in some cases drilling leads have been identified. 'Z6nsultantS from Robertson Research (Ausvtrali4i - Flower Doery Buchan (Australia) supervised the overall basin evaluation stuidies while speciaiists or experts, e.g. geochemists, paleontologists, were provided by the consultants in areas which required additional expertise. The basin evaluvation studies were supplemented by additional geochemical, sedimentological and biostratigraphic analyses which required these kind of information. Support tervices were provided by BED paleontologists, geoschemists, cartographers and petrographers in implementation of the Project. 4. The 1CiQif_QgaeQO t of the Project was implemented through the development of a joint training module for both BED and PNOC staff. It was agreed that short-term courses be held in- house in Kanila, not only to save expenses in plane fares and travel allowances but to maximize attendance to the individual training courses as well. International Human Resources Development Corporation (IHRDC), a Boston-based training company, was awarded the contract as a result of competitive bidding. The training program was implemented during the period July-November 1985. Ten (10) courses of one-week duration each were agreed upon with IHRDC and were designed for both the junior and more senior staff, taking into consideration factors such as experience of participants as well as relevance of subjects to the objectives of the Project. IHRDC provided tke instructors as well as the training manuals af other materials. In some courses like "Seismic Stratigraphy" and "Geochemistry" examples from the Philippine setting were used as case histories. A list of the courses conducted is shown in Annex "D". All members of the technical staff of BED and PNOC attended at least one course. Most in fact attended 2 or 3 courses. The more senior members including non-technical participants attended the - 19 - course on "Economic Evaluation of Petroleum Exploration and Development Projects" andi Found it most applicable to their pro.fessiorn. 5 Qitje t QroPLP The promotion oF the results of the basin evaluation constituted the most critical phase of the Projict. A promotional campaign program was developed together with thhe Worid Bank and preparations were made for a September 1987 presentation to the oil industry. Prior to this, preliminary presentations have been made before 'he American International Petroleum Negotiators (AIPN) in Houston last March 12, 1987 and the Circum-Pacific Energy anti minerai Resources Conference held in Singapore in August 1986. A short trip to Brisbane, Australia was also made to attend the Australian Petroleum Exploration Association (APEA) in March 1987 to initiate contacts with oil exploration companies based in that country. In May-June 1927, a three-man team took special trips to Tokyo, Calgary, Denver, Dallas, Houston and Los Angeles where visits were made to individual oil companies to introduce the Project. Brief presentations were also made before a special gathering of oil explorationists in these cities. The September 1987 promotional campaign was designed to introduce the results of the Project and make known to the oil industry the availability of the report which details the petroieum potential of the Philippines. A promotional team consisting of BED officials and convuitants gave 2-day presentations in Manila, Houston, cargary and London. The First day of the presentation highlighted the results of the petroleum basin evaluation studies while the morning of the second day covered the legal and contractual framework of the Philippine petroleum service contract system. The afternoon of the second day was reserved for consultations between BED officials and representatives of oil companies on a personal or private basis. The members of the promotional team,. the presentation agenda, the participants to the presentations and the subscribers to the report - 20 . are attached as Annexes "E"., "F", "G-1 to G-4 and "H". There wa- quite an encouraqirng responrse to the promotional campai¢gn as gaugeti from the number of oil companies that sent representativese to the presentations. Several orders for the purchdse of the report also have been placed after each presentation. The one-on-one consultations afforded some of the participants to personally meet the eED officials and clarify certain matters which were relevant to their case. It can be concluded that the promotion as a whole has been very successful in re-kindling petroleum exploration interest in the Philippines based on the number of contract applications which have started to come in starting the first quarter of B.1 The Project was implemented by the Bureau of Energy Development (BED), with the assistance of the consulting firm, Robertson Research (Australia) Pty. Ltd. and Flower Doery Buchan (Australia). The consultants provided guidance to the BED team of geologists and geophysicists with respect to the evaluation of the petroleum geology and hydrocarbon prospects of Philippine sedimentary basins. These included the method of study and approach to basin evaluation, format of presentation of the results. production of an information or promotional package and participation in the presentation of the results during the promotional phase of the Project. In addition to the basin evaluation studies, the consultants assisted in the development of the offshore seismic survey program and supervised the data acquisition, processing and interpretation of the seismic data. It also provided specialists or experts in several asp ts of the study which required the services of expeo,nced micropaleontologists, geochemists, sedidintologists, geophysicists, etc. The BED technical staff, consisting mostly of young geologists and geophysicists with very little exploration experience, were involved in all the aspects of the Project and this served as an effective on-the-job training for them. Their direct involvement under the supervision of the consultants served one of the major objectives of the Project which is to upgrade the technical capability of the BED staff. - 21 - Charf-es alnd modificationzs in the scope of the Pro.iet;t during its; execution ha,d to be made and for these the BED together with the consultants and the Wor ld eank c;ommunicated freely/ with each other to come up with -a c+omnmon pian of action. Such changes took into r,onsideration the ultimate objectives of the Project., the costs - it would entaii antd the e1fect on the promotion schedule. As it turned out, the Project was successfuliy completed well within the loan funds. In fact US$5.5 million of the original loan amount of U$*13.5 miiion was cancelled. Thus, the total loan fund availed for the Project amounted to US$8-.UO million. C. The BED Loan 2201-PH dated 28 Oictober 1982 amounted to $13.5 million against which disbursements were made for IOEf% UTo7i4n expenditures of contracts awarded for he aeromagnetic survey, offshore seismic survey, specialized services, consultants' services and training. As the Project progressed, $4.5 million of the loan was cancelied in May 1984 and by another $1.0 million in June 1985, thus reducing the total loan to a final amount of $8.0 million. The loan closing date was firmed up as December 31, 1987. The amendment to the loan was brought about by reductions in the actual costs of the aeromagnetic and seismic surveys which in 1983 saw very favorable or low prices for these types of services. rhe reductions in cost, however, did not mean a reduction in work coverage. On the contrary, a much wider coverage was achieved even at the reduced costs. Allocation for consultants' services and goods and specialized service for the basin evaluation program and geological reports were increased due to extensions to the Project completion date which re-uired additional man-months of consultancy services. Annex "I" shows the original 1982 loan proceeds, the various categories to be financed therefrom and the final 1985 amended loan allocation. I ~~D- PrMoQ4r_t2t i) LLtQf L±QQOc2Lrect The services of the -various contractors and consultants for the Project were obtained through International Competitive Bidding (Ice) procedures. *ne exception, however, was the processing of the bulk of the offshore seismic data which was done directly through PNOC- -. 22 - Exploration Corporation which put up a seismic processing center funded by their own loan from the World Bank. rhe center was inter.ded to process not only PNWil's onshore seismic diata but BED's as well. Subsequently, the same center will process industry data as a commercial ventture. In the case of the category "specialized services for basin evaluation" which actually was geochemical analyses, it was agreed that these will be provided by Robertson Research (Singapore), an affiliate of Robertson Research (international) and which was the most accessible laboratory for the Project. The major contracts procured for the Project are shown in Annex "J". ii) Pefrno gtvSr a,- ^e_Qr mrYPY The contractors, Questor and Intex, have performed in a most professional manner and have efficiently carried out their respective tasks to implement and complete the aeromagnetic survey program. Questor especially exerted all efforts to replace the survey plane that crashed after the start of the survey and proceeded with the acquisition program. Both companies have been very accomodating in training Filipino staff assigned to this component of the Project, both in the field data acquisition and in the processing/interpretation phase conducted in Canada and the U.S.A. b. Df fsfbgme_...i§uzyox Seiscom Delta carried out the offshore seismic survey, including additional coverage, in less than 5 months which was still within the original 5.5 months programmed for this Phase of the project. The contractor proceeded to carry out the work program based on a notice to mobilize even before the contract was formally signed which required some other government agency - 23 - approva1l.. Several eED staff aSsiqned aboardi the survey vessel were givers on-the-joc training on the technology of marine sei-.mic survey procedures. 2. X- _rQsfl.9 Seismic data processing was done by Seiscom DeLta on 1Q00 line-km of data in Metblourne, Australia. Two (2) BED geophysicists were on a 2-week in-house orientation on seismic data processing in Melbourne. These same geophysicists were also involved in the data acquisition phase and their stint in Melbourne gave them a complete exposure as seismology. The bulk of the data was processed by the newly established PN:C Seismic Processing Center. The accessibility of the Center made it possible to have close interaction between the client (BED) and the processing contractor. As such, modifications or variations in the processing program could be immediately effected to be assured of the highest quality processing product. The nearness of the Center also enable most of the BED geophysicists to be directly involved in the data processing as part of their training program. c. It InIg The training component of the Project was implemented by IHRDC through the conduct of ten (10) short-term courses in Manila. The training module was developed jointly by BED and PNOC-EC with IHRDC and special emphasis was given to the relevance of the courses vis-a-vis Philippine setting and the qualifications of the instructors which in some courses required experience in the geology of Southeast Asia. IHRDC was most receptive in accomodating the requirements of the training program and in redesigning the curriculum to fit the working backgrounds of the participants. The training materials including manuals, video tapes, slides, etc. were provided by tHRDC. The holding of the training courses in Manila enabled maximum participating of sjEA and PNOC-EC employees - 24 . and in the process minimized expense.s had these courses been held outside the country and which would have entaileti foreign travel expenses. i. Lii' er f r rnti'QD' a. _ yg!;A 8,0i Full-time consiltants and part-time experts from Robertson Research (Australia) and Flower Doery Buchan (Australia) supervised the individual basin studies as well as the production of the final reports and the promotional packages. o)ne important requirement of this Project was that the consultants for basin studies should be very experienced and knowledgeable in the geology of Southeast Asia. Another requirement was their ability to coordinate and work with relatively inexperienced BED geoscientists. The close working relationship between consultants/experts and BED staff was an Pffective means of transferring technology. The actual and direct involvement of Filipinos in all the aspects of the Project under the guidance of the consultants/experts have enabled the former to gain the necessary experience and confidence to continue further basin evaluation studies. As a whole the assistance provided by the consultants/experts was most satisfactory and was carried out under a wholesome atmosphere conducive to a harmonious working relationship. b. e_rJg4St.QLVJg n The promotion of the results of the basin evaluation studies constituted the most important and critical phase of the Project. The timing of presentations to representatives of the oil industry had to take into serious consideration the worldwide oil exploration climate 4nd the prevailing political and economic conditions of the Philippines prevailing at that time. September 19t37 was agreed upon with the Wlorld Bank as the presentation month with Manila, Houston, Calgary and London as the venues. It was also agreed that Robertson Research - 25 - (Australia) .ajntJ Flower Doery Buchar, (Australia) b e retained to coordinate the promotjonal pre.E.entations. The various foreign 'rub ridiiaries of Robertson Research rnternational were tapped to give azsistance in the promnotionai campaign. The retainment of Robertson Research (Austraiia) andi Flower Doery Buchan as coordinators of the promotion was in part influenced by their previous experience in a similar project in Papua-New Guinea. Their familiarity with the mechanics of proJect promotion have made it easier to plan and implement the Philippine petroieum exploration project. E - Disbursements were made against 100X of foreign expenditures of contracts awarded for geophysical services, specialized services for basin evaluation (geochemical analyses), training and consultants services for project supervision and promotion. Out of an adjusted loan amount of US$8.0 miliion (with a closing date of June 30, 1988) an amount of $7.679 million has been disbursed as of March 2, 1988 as per advise of the World 8:-^nk The balance of $321,000 is expected to be more than sufficient to cover additional requests for disbursements, mainly for the promotional expenses which were being processed as of -June 198e. iV. INSTITUTIONAL PERFuRMANCE A. PerfQ r npi n gmbi gv3QnZz The implementing agency, Office of Energy Affairs (')EA) and its predecessor Bureau of Energy Development (BED), has complied fully with all the requirements of the loan agreement. The Project was completed at costs below the original loan. The time of project promotion had to be adjusted and extended to take into consideration factors such as world-wide petroleuAm exploration climate antd inteflw conditions then obtaining in the Philippines. The promotion of the results of the Project in September 198- was most timely since it coincided with stable oil prices and with the institution of political and economic reforms in the country as a result of the change of government after the February 198, people power revolution. -25- One of the mandates of the OEA is to encourage and qiuide business activities relative to the exploration, development and utilization of fossil fuels and other form: of energy resources. This Project specificalily aims to assist the private industry by making available a comprehensive report which wili serve as a basis upon which the oil companies could identify areas with potential for commercial hydrocarbon discoveries. The report itself is the latest compilation and synthesis of all available exploration data and the first attempt of a quaiitative assessment of the petroleum potential of the whole country. A study of the report will give the oil companies a quick understanding of the petroleum geology of the Philippine as well as identify the more attractive areas in terms of petroleum potential. This saves time and effort and enables an interested party to already apply for a petroleum contract over an area. V. FINANCIAL PERFO RMANCE The 1982 Loan Agreement for the Project 2201-PH amounted to $13.5 million but subsequent cancellations in 19e4 and 1985 reduced the loan proceeds to a final amount of $8.0 million. The reduction in the loan did not mean a decrease in the activities nor the elimination of some of the project components. Rather, the Project was completed even at the reduced cost due to the low price of offshore seismic data acquisition and processing at the time of the survey which resulted in savings under this project category. This also eliminated the need to use up the allocation for the project category "Unallocated". The unaudited financial status for the Project including loan proceeds and GOP counterpart as of end 1987 is attached as Annexes "K" and "L". VI. CONCLUSIONS The *oject can be considered a succLxs if it has met the origi ft objectives which were (a) to rekindle petroleum exploration interest and (b) to strengthen the technical capabilities of the staff of the implementing agency. The first can be measured by the number of oil companies that attended the presentations, the number of subscribers to the promotional report and most important the number of companies that have applied for petroleum contracts in the Philippines. - 27 - More than seventy (70) coDmpanies, mostly I oreign-based, attended the presentations in Manila, Houston, Calgary and London; 34 companies have zo far subscribedl to the report and 10 companies have inrJicated interest and/or applied for petroleum contracts as of Juine 198e. It i- expected that additional report subscriptions and contract applicatjons will be received by the QEA for the rest of 15.48. The Project has enabled the technical staff of the uEA to be directly involved in all the components and various aspects of the study under the supervision of the consultants and this served as an effective on-the-job training for them. A 10-course training prosram of one- week duration each was held locally but contducted by a professional USA-based training firm augmented the training needs of the Filipino staff. -The ultimate test to the success of the Project can only be realized by a significant increase in the number of exploration wells drilled which hopefully will result in major hydrocarbon discoveries in the very near future. Oniy then can there be an important contribution of the Project into the national goal of self-sufficiency in energy. . ~~~~~ .28- AN=EX A AEROMAGNETIC DATA I BED- WS (1983-1984) COVERAGE X t l [ g AMOCO s1981) SCALE CLUZO-N PROJECT MAGNET(1909) A NO ANNUZ 'B -8 BED - WB LINES t -- BED -PEOCANADA LINES SEISMIC COVERAGEt 4 SCAL a L U ZON ~\ 0 PC . I N A 30- 8~~~~ ~ ~ ~ A C- LAS C= SEBIMEAR BASINS 2. mm | OF THE U UTUU U = i PHILIPPINES . VW U=t |Ut I mmI.UU SW-A=s 0 tAL L &SOUTWEAS UJLU- ? US-WIl MUSMl 4 I AGU-0 .1 se NamSwo POOM- LULUSIA0*, A d i t.S . . t A .t_ _J .1x AM, ~CL~f t (9eae a 1985 TRAINING PRuGRAM S9QXIL] L1 U3IBUQIuBL DA1£ 1. Seismic Stratigraphy Dr. R. E. Sheriiff/A.R. Brown July 22-26 2. Advanced Seismic Stratigraphy Dr. R. E. Stheriff/A.R. Brown July 22-26 3. Petroleum Generation and Dr. D. W. i*aples July 29 - Ciccurrence (Geochemistry II) August 2 4. Geochemistry II Dr. D. . tWapies August 5-9 5. Structural Geology Dr. T. L. Thompson August 12-16 6. .)pera-Hole Lou Analysis and R. M. Bateman August 26-30 Formation Evaluation 7. Practical Prospect D. C. Morrill Augsut 26-30 Generation & Analysis 8. Practical Sub--surface D. C. Morrill September 2-6 Geological Analysis Using tSell Logs 9. Economic Evaluation of N. W. Miller September 9-13 Petroleum Exploration and Development Projects 10. Carbonate and Sandstone fR. Sneider November i8-22 Reservoir Geology -32- PROMOTIONAL TEAM W. R. dela Paz - Director A. P. Madrid - Chief, Oil and Gas Division V. C. Laroza - Chief, Legal Division G. N. Tuazon - Chief, Compliance Division L. G. Flower - Senior Geophysicist R. A. Reyes, Jr. - Geochemist/Geologist R. E. del Pilar - Exploration Manager N. L. Caagusan - Chief Geologist L. K. Dizon - Senior Geophysicist 33 ANNBX 1 PHILIPPINE PETROLEUM EXPLORATION PROMOTION PROJECT PROMOTIONAL PRESENTATION AGENDA e:30 - 9:00 Opening Ceremonies 9:00 - 9:10 Introductiorn A. P. Madrid 9:10 - 9:30 coffee Break 9:30 - 10:20 Regional Geology Geochemistry, Reservoirs R. A. Reyes, Jr. 10:20 - 11:00 NW Palawan A. P. Madrid/ L. G. Flower 11:00 - 11:30 SW Palawan/Reed Bank L. G. Flower 11:30 - 12:00 Cuyo-Mindoro L. G. Flower 12:00 - 1:30 Lunch 1:30 - 2:00 SE Luzon R. A. Reyes, Jr./ L. G. Flower 2:00 - 2:40 Visayas R. A. Reyes, Jr./ L. G. Flower 2:40 - 3:00 Sandakan/Suiu Sea R. A. Reyes, Jr./ L. S. Flower 3:00 - 3:20 Agusan Davao/Cotabato A. P. Madrid/ L. G. Flower 3:20 - 3:40 other Basins L. G. Flower 3:40 - 4:00 lJrap-up A. P. Madrid 4:00 - 4:30 Coffee Break 4:30 - 6:00 PNOC: Cebu/Mindoro N. L. Caagusan 6:00 - 8:00 Cocktail Reception £#;EQQN"QA XEaQ1 Il 8:30 - 9:30 Legal/Contractual Framework V. C. Laroza a. 1987 Philippine Constitution b. uil Exploration & Development c. Model Agreement 9:30 - 10:30 Coffee Break 10:30 - 11:00 Finanrial/Accounting G. N. Tuazon a. Co-'..ract Requirements b. Au<..t Accounting c. Accounting for Production Proceeds d. Repatriation of Investment 11:00 - 11:45 Operating Procedures V. C. Laroza a. Dioing Business in the Philippines b. Goverrnment Rules & Regulations 11:45 - 12:00 Wrap-up W. R. dela Paz 12:00 - 2:00 Lunch 2:00 Consultation with OEA Officials - 34 - AIM *G-1 PHILIPPINE PETROLEUM EXPLORATION PROMOTION PROJECT HOTEL INTERCONTINENTAL MANILA MANILA, PHILIPPINES SEPTEMBER 14-15, 1987 EAB CIP#TE S AJMAN (CONSULTANT) JAPAN NATIONAL OIL CO. ALCORN PHILS. INC LUXbIL N. L. ANGLO-PHILS. INC. MARATHON OIL BASIC PETROLEUM NORPAC INTERNATIONAL INC. BGR, FEDERAL REP. OF GERMANY PETROFINA BHP PETROLEUM PHILODRILL CHINESE PETROLEUM ORIENTAL PETROLEUM CRA EXPLORATION RAN RICKS PHILS. CONSULTANT SEAFRONT PETROLEUM HARTbGEN ENERGY PHILS. LTD. SOS FOR PETROCONSULTANTS S.A. INDONESIA PETROLEUM LTD. UNIvIL EXPLORATION & MIN. DEV. CO. INTERNATIONAL PETROLEUM CORP. - 35 - ANNEX G2 PHILIPPINE PETROLEUM EXPLORATION PROMOTION PROJECT HOTEL INTERCONTINENTAL GALLERIA HOUSTON, rEXAS, U.S.A. SEPTEMBER 21-22, 1987 PAR 1,19PAN15 ALCORN INTERNATIONAL OCCIDENTAL AMOCO PECTEN INTERNATIONAL CO. THE ANSCHUTZ CORP. PENNZOIL INTERNATIONAL CO. ASAMERA PETREL PETROLEUM CO. CHEVRON OVERSEAS PET. INC. PETROLEUM EXPLORATION & DEV. CO. CONOCO INC. PETROCONSULTANTS INC. EXXON CO. INTERNATIONAL PRIMARY FUELS INC. GULF EXPLORATION RAN RICKS OF THE PHILS. JAPAN NATIONAL OIL CORP. SUN OIL MAXUS ENERGY TENNECO OIL EXPLORATION MOBIL EXPLORATION TEXACO OVERSEAS HOLDINGS INC. NORTHERN MICHIGAN EXPLORATION CO. SANTOS * - 36 i ANNEX *G-3- PHILIPPINE PETROLEUM EXPLORATION PROMOTION PROJECT DELTA BOW VALLEY HOTEL, CALGARY ALBERTA, CANADA SEPTEMBER 24-25, 1987 ASAMERA INC. PETRO-CANADA ARCO INTERNATIONAL SCEPTRE ARCO OIL AND GAS TEXACO CANADA ST. PLAINS RESOURCES TCPL RESOURCES LTD. HOME OIL UNOCAL INTERNATIONAL _ 37 _ ANNE *-4 PHILIPPINE PETROLEUM EXPLORATION PROMOTION PROJECT HYDE PARK HOTEL, LONDON SEPTEMBER 29-30, 1987 AGIP S.p.A. FAR EAST RESOURCES APOLLO OIL PETROLEUM ECONOMIST BLANCHE OIL AND GAS SHELL BRITISH PETROLEUM STATOIL BRITOIL TOTAL CRESCENT PETROLEUM TRAFALGAR HOUSE DANSK OLIE OG GAS TRICENTROL * EGLINTON EXPLORATION WHITEHALL PETROLEUM ELF AQiUITAINE oSto ENTERPRISE OIL PETROFINA -38- PHILIPPINE PETROLEUM EXPLORATION PROMOTION PROJECT AGIP S.p.A. ALCORN PHILS. AMOCO PRODUCTION ANGLO-PHILS. ARCO INT'L. SHP PET. INT'L. BP PET. DEV. BRITOIL PLC. CHEVRON INT'L. CHINESE PETROLEUM CORP. CONOCO INC. ENTERPRISE OIL EXXON GULF EXPLORATION HARTOGEN MGT. PTY. LTD. (2 copies) INDONESIA PETROLEUM (INPEX) INTERNATIONAL PET.CORP. JAPAN NATIONAL OIL COMPANY MARATHON EXP'L. MOBIL E & P SERV. OCCIDENTAL PETROLEUM ORIENTAL PETROLEUM PE£rEN INT'L. PENNZOIL PETRO-CANADA INT. PETROFINA FAR-EAST PNOC-EC RAN RICKS OF THE PHILIPPINES (2 copies) SCEPTRE RES. TOTAL CFP TEXACO ULTRAMAR UNION OIL OF CALIFORNIA (UNOCAL) VULCAN IND'L. AN ' lt.AN 2201-PH: PHILIPPINE PETROILEUM EXPLORATION PROMOTION PROJECT LOAN PROCWEEDS (IN U.S. DOLLARS) ORIGINAL AMENDED AMENDED LOAN LOAN LOAN CATEGORY (10-28-82) (5-22-84) (12-J7--95) 1. Aeromagnetic Survey $ 3,800,000 $ 3,187,359 a. Acquisition 2,554,309 b. Supervision/Interpretation 633,050 2. offshore seismic Survey 6,100,000 2,499,598 a. Acquisition/Processing 1,859,598 b. Processing 640,000 3. Specialized Services 200,000 200,000 200,00 a. Geochemical Analyses 4. Consultancy Services 1,000,000 1,354,594 a. Basin Evaluation 1,204,594 b. Promo Package 150,000 5. 1raining 100,000 100,000 100,000 6. Front-End Fee 199,507 199,507 199,507 7. Ulnallocated/Contingency 2,100,49i, 1,458,942 208, 942 Promojtional Expenses 250,000 $1 ,St5O,030 $ 9 ,0,0100. $ 8, 000 ,010 LOAN 2201--PH MlL "-lQ-RM 11_H AIP-MuJEC T DATE 1. Aeromagnetic Survey uuestor Surveys, Ltd. 14 January 198.3 a. Data Acquisition Seiscom Delta United (Int'l) 07 July 1983 Corp., Singapore b. Data Processing Seiscom Delta United 07 July 1983 PN(J-EC, Philippines 12 December 1984 3. Specialized Services Basin Robertson Research (Australia) 03 October 1984 Evaluation 4. Consultants Services: Basin Robertson Research (Australia) 19 May 1983 EvaluatIon and Promotion & Flower Doery Buchan (Australia) S. Training International Human Resources 04 October 1985 Development Corp. (IHRDC) Boston, Mass., U. S. A. PHILIPPINE PETROLEUH EXPLORATION PRti 4it ION PROJECT LOAN PROCEEDS (IN U. S. DOLLARS) CATEGORY 1983 1984 1985 19136 19837 TOTAL 1. Aeromagnetic Survey a. Acquisition (uUESTOR) 1,547,100 998,209 - - - 2,545,309 b. Supervision/Interpretation 325,094 241,891 75,065 - - 642,050 (INTEX) 2. Otffshore Seismic Survey a. Acquisition & Processing (SEISCtM ) 1,761.521 98,077 - - - 1,859,598 b. Additional Processing (PNOC) 63w, *2 2,931 - - - 640,000 S. Goods arid Specialized Services - 100,000 100,000 - - 200,000 4. Consultants Services a. Basin Evaluation (ROBERTSON) 429,318 344,540 430,736 146,800 56,980 1,408,374 b. Proatotional Package (ROBERTSON) - - 150,000 - - 150,000 C. Promotional Expenses (ROBERTSON) - - - 30,000 121,525 151,525 5. Training (IHRDC) - 75,000 - - 75,000 ;. Front-end Fee 199,507 - 199,507 SUB-TO1'AL 4,899,609 1,785,608 830,801 176,800 17,.505 7,871,363 .. Unallocated 128,637 *4*. TOTAL 8,000,000 -42- ANFEX *L- WB - Assisted Philippine Pecroletn Exploration Promotion Project GOP Counterpart CY 1983 - 987 1983 1984 1986 1987 TOTAL A. Nersonal Services 100-10 C:;traccual Serv. P 4,230 26,503 131,122 _ - 161,855 Honoraria 105.300 151.700 161.650 - 113,000 531.650 Total Personal Serv. P 109.530 178.203 292.772 - 113.000 693.505 B. Maintenance and Other OeeraSi; Esfin8es 200-02 Travelling Esp. 1 672,539 299,521 247,500 45,435 83,470 1,348,465 03 CountmatiLn Services 433 6,181 14,217 3,541 2,683 27,055 )5 Trasportacio * Services 10,949 14,098 1,515 - 900,000 926,562 'J6 Other Services 14,103 35,196 92,116 18,466 11,339 171,220 07 Supplie gut Materials 286,050 275,589 1.155,255 142,940 1,654 1,861,488 O Renc - - 147 - - 147 17-100 M & R of Mocar Vehicles 2,129 4,300 28 313 112 6,882 17-200 Aucoparts - - 16,828 13,522 9,649 39,999 17-300 Gasoline and Oil 8.350 20,799 30,616 6,932 4,987 71,684 21 Taxes and Licenses 3,962.100 2,535,952 1.802.956 134.130 .101.310 8.536,448 Total HOOL P456.653 3.191.636 3.361.178 365.279 1.115,204 12.989,950 OO-33 Equipment Ouclay P1.427.431 - 1,354.730 - - 2.782.161 TOMAL (CASH) P6.493.614 3.369.839 5.008.680 365.279 1.228.204 16.465.616 Salarias(in-klnd) P 348.629 949.699 1.146.604 693.292 1.128.904 4,267.128 ..A£i TOTAL 06,842,243 4,319,538 6,155,284 1,058,571 2,357,108 20,732,744 'C, S 4311 M AT III STATIISICA. WUSTIaTOa 1. iUlatud ha Low for hllmlt of Enr hswrce * LoaM Year of Title a a. PrM aprwval Stats Coets Coal Ekplorstial Esplorlng for FY Q2 Coploed Ruew prod, 2131-F cot bt dfticult to deelop 6eotli Explo io N F 192 Compled Stm fod for Exploration12203P- and Luo for steam cemr 1 delomt Pmrol attract oil FY 19 Completed il Coa is Exploratim/2202- ampies Deceer 199 attruted ic flanito PFor supply to FT 19 Lm effectie Prngr just Beotherl Pm uo a apprail of fm Doecmr 19 comced Project2M" getheml fields -44- 2. Project Timetable Item Dte Pl_d Date RVised "te Actul -idetifiation $ (Executive Project gamay) Late 161 Late 19 -Pr atin Late 19U Late M1 -A_risal-. Febr, 1962 Ferury, 1912 -Lu negotiation July, 192 July, 1932 -oad Appovll $"t wr, 19 Septem , 16t2 -Loan U re ctor, 1962 ctobr 28, 192 -Loa Closing Dm 3, 196 Dcmb 31,6 Demab 31, 1967 -Completion wot Jun 30, 197 Dcmbr 31, 191 bDcmr 31, 19 Notes s o pecise date can be fixed for Identification I 'Preration'. 0 ad prepre pln for a nationside eismic suey i Nay 1981. After reieing the lE plan, a Ink mision recuoud that ae- mgtic suv be uW tda follow by slected sitsic enwra. and interprettio. The presi of the EI rew t for a Ioam apas to hav be done speditisly tbro vario stge with the lon bmg ffectiv" on a u 26, 1963. The qmpltio eport as delaed with a vie to asetaining the repon of the oil Cowanies to the eploration promotion. SS To he revised is to Wm it is actully snt. o i p . p. * 0 I!£ w . _.~~~~~~ - 46 - 4. Project Ioplumtation ledicatws Appraisl Estiate Actal I Futil.t Aw_edqtic -K ilmtes 1,000 215,04 1n Offshore seismic =Kilometers 8,40 9,104 108 asin Evolution A-m et bsins 15 15 100 pr - 47 - S. Proect Costs ad Fiacicu As Projet Costs Apraisl Estlote Reisd Estiats ktul ---- 000- _5s= 400- _s 000 Locl Foign Totl Loaul Forei Total Lal Foeign Total Aermapetic Suve 420 33 420 241 27 30 473 0 a/ Off ore Seimic SurvW 40 M 7 214 245 2701 7 2416 291 survey Supevlsiu Aerusag 20 10 200 54 233 339 41 29 360 Gfflmresiseic 10 40 70 14 99 114 8 104 112 TraIing 10 30 40 2 24 23 14 49 95 sai ealuatio c ltats 50 00 O 115 1163 12 200 1349 154 Local cota ts o 1i0 83 03 201 201 Suppot pirsmne Sevic 5L0 140 490 390 140 520 34 135 531 Promutl activity 10025 385 ga cost 1910 11040 1295 1109 95 8063 1680 57 927 --yiCal contIngnc 270 120 1470 321 447 7i Pric cotingnq 300 00I 1350 179 114 295 Total Project CoSt 2400 13290 15770 10 7517 9124 1430 75M 9247 frt EndFee 200 200 200 200 200 200 TOTAL. 2430 13490 1I97 1 7717 932 1. 10 17 9447 bt s fSdcmp rate usd Aprailas Rvised Estsutes ktual: As prviled P9.3/SI 199s P11.5/1S 1994183s Pt4/91 Al inclde cost of interpetatios bl actul inelud 40,000, E0s contribution to wisic pro. csI amputr acter in scdap for pocesn ED- g020 km. of oftfst simic data. Com tss Nest comitaUts haing em .ui by ctod 193, prject mats we rvisd at that tin. . I I~I ~0 PU3b{ SW - 51.f 1 15'11 I~~ *1111l2 I a I j t :1 6O U' 4. i I .1 .1 'a. I - k -. 4' - S 3 qd .1 I - 51 - 7. Sats ot Cmats Dsadlla for Covsat Subject c1umliue Status SKUtiM 3.02(b) Auiotmt of Jowl 1,1"3 DM is Nay 1 multash for bas evaluation sectis 3.06(a) Onlop plan fa Compliud ith * ~~~~~~~prutlon cmpaign by humw 11 and periudically uate it - 52 - B. he of t Reoce fw Ln 2201 As Staff lputs Stag of Plasnd Rvisd Final Project Cycle m Field He Field He Field Commts -Staf~~taf VMeSs (CuObbd) Through AWpril 0.7 Arwaisal throug hard Apprvl 2..2 NIT AVAILAILE bard Aprval togbh Effectivems 3.6 Supervisio 5.5 TUTII. 95.0 -53- Stap of Nuthi Nuu at Days in Sjiul istiu Pcrforuaco type of Project Cyde Yar pea field nWe m sted 11 atlq status2/ prbem 31 T6VoUII Appraisal Appraisal urough Ot VAILAUE howd AWpval hard Approal rtbab Eftectimes Srvistom Sovsis I H/52 2 1.5 A,d I s0pvislm 2 Q2u 3 4 a,b,e 2 f Spuvisiom 3 10H33 3 4 a,b,c 1 Supervisimn 4 5/"M 3 5 a,b,c I S- rvisiem 5 11/84 3 5 a,b,c 1 Supevlsl 6 0515 3 6 a,b,c I Spqvisio I 05136 2 5 a,c 1 Supeilsion @ 031/ 1 1 b 1 11 a- Eeonomist, b- Ueopyihcist, c- Iuologist, d- Fiancial Analyst e- Proruut Specialist 21 1- Pole fre or uwr, 2- ldeate problm 31 F- Financials ID3 ha a temporay probeim of Govt. budget rela . 'a.~~~~~~~ ,~~ 1t11 -t~ ~ t tt t ] }t I MAP SECTION i II I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ l~~~~~~~~~~~~~~I IBRD 16361 - i - APRIL 1982 CHINA 12o PHIL IPPINES OIL EXPLORATION AREAS AND SEDIMENTARY BASINS VIET NAM PHILIPPINES -20 VW)=n CMSERVICE CONTRACTS 3 G0YSCAL CONTRACTS (Idtiina and Seisnic Studies): _ gdonve _ 1. PHIlLIPS (494,537 h@,) A. PHtLLIPS/PECTEN/PODCO ESRL*EI / \ fg;S F2. SIGNAL S CHAMPLIN (317.S35ha.) /PHILODRILL LAYSIA/ K 3. AMOCO/ MUSKYI863,827hkm) B. POGEI /LEPANTO "LAYStA/ I C w 4. PNOC/P1ONEER SMY1204h533o.) C. CDCP- Ilo1 Q F , JSKA7 1 ¢ * CITIES SERVICE/HUSKY I D. PNOC-EC - Minduro t 7 > / / 1362.0913? ha.l E. SEAFRONT-Cuyp Shelf INDONESIA I 6 1 SALENIAMOCO1.1124,000has.) E AMOCO-Sulu Sea ___.__________________ 7. PNOC-EC1276,200 hs.) G ORIENTAL PETROLEUM 8- BASIC LANOL(OI3436 ha.J i HUSKY OIL 116 , s/ a l W9. INTERPORT RESOURCES I. HUSKY OIL (220D000 ha) J. CPC/PNOC-ECfPODCO S SEDIMENTARY BASINSi I 1a P'LIIUPS/SHELL (500000 has) K. AMOCO-A Agun - Davos 1. Ntthvun Lutan II. PHILLIPS/SHELLE AO1,400000has.) L. ARCOICDCP-Mindoto 12. BASIC/ORiENTAL(94,583 ha.) MARCOICDCP-8awcra 2. Central Luzons I NPNOC-EC -Catabato 1. tsthmm Lvzon { -_ 4.Sical Shell GEOCPHIMCAL PERMITS 16 5.iEcol I 1 6l & Samar R AA. PNOC-EC- Calu 7. Peana SBI Z/Ma ilE. PLACER R. Vin CC. PLACER 9. Au / Davgo lia Cato - 7ntsw-- iena B anesi 11. Suhu South 4 Vnwi 12. Palaiwa South 14. Misnd or '3o 2 LOMETERS 14. Mindeo * o MILES \ s s~~~ I '--. . .N 4-' o , X \^^o o 0/41S {////w tt S {~~~~~~/$YNS I~ / ,,,~~~~~~~~~1 I ' jL o ~~PAIAWAIVt I' \' \ N" , 12 ) - - ; v \17r ,_~~~~~~~~~ /~~ w .*-1 W If ~ ~ ~ MAL AYSIA (So boh) *~wrh_Wrsoata 6' 1t ~~~~~~~~~~~~~~~~~~~~~~~~~~~~12C 112I . . ,} I~~~~~~~~~~~~~~~~