Otto Energy Ltd. of Australia is leaving the Philippines to focus on oil and gas exploration in the US and Africa, a source said Friday.
“Otto is exiting from all its Philippine assets,” the source said.
Otto confirmed in its quarterly report that it “commenced structured exit from Philippine assets.”
The company plans to sell its stake in service contract 55 southwest off Palawan, after seeking a two-year moratorium in exploration with the Energy Department.
It is also exiting SC 73, or the offshore Mindoro-Cuyo prospect, which was awarded to the company in 2013, the source said.
The source said Otto Energy planned to develop other assets with “better potential” in other areas.
SC 55, which contains the Cinco prospect, has a strong potential and requires investment from large oil and gas companies. The contract involves the exploration, development and exploitation of petroleum resources in the offshore area of southwestern Palawan covering about 9,880 square kilometers.
“Otto sold Galoc when oil prices were high and not long after, oil prices started tumbling down. This enabled Otto to buy better assets in the US, particularly in well-known oil regions such as Alaska and Louisana,” the source said.
He said Otto Energy had also acquired assets in East Africa “with better potential than its Philippine assets.”
“While it had discovered gas at the Hawkeye prospect in SC 55, it’s not big enough to be commercial. Nonetheless, the discovery of gas at Hawkeye is very significant for the Philippines because it enhances the prospectivity of the nearby Cinco prospect which was what BHP believed to be gas prone and was prepared to drill before it pulled out in 2013,” the source said.
The source said Cinco and other gas leads in SC 55 would be large enough to replace Malampaya, “but it will take major oil companies much bigger than Otto to effectively explore and develop these gas prospects.”
The source also said that with plunging oil prices, oil companies were not keen on asset acquisitions, including SC 55.
“The low oil price regime is good for consumers but it is indeed bad for the oil industry because oil companies stop exploiting,” he said.
Otto Energy earlier asked the Energy Department for a two-year moratorium in exploration activities under SC 55.
The consortium said it had already fulfilled its work work obligation under the current exploration sub-phase by drilling the Hawkeye-1 exploratory well in August.
Otto Energy plugged and abandoned the Hawkeye-1 exploration well after declaring it non-commercial.
The Hawkeye prospect contains best estimate of 480 million barrels of oil and best estimate net prospect resource of 47 million barrels of oil.
The Cinco prospect, also located at SC 55, is estimated to contain up to 2.9 trillion cubic feet of gas.