The agreement is a 50:50 venture over the offshore Calauit Oil Field between Ottoman and the AustralAsian Consortium, a collective comprising AustralAsian Energy, Middle East Petroleum Services, RGA Resources, Rufino Bomasang and Ruben Gan.
The joint venture partners believe the field could be producing between 7,500 and 15,000 barrels of oil each day by as soon as July, when a period of extended production testing is scheduled to start.
Calauit, which sits within a 5000 square kilometre permit in 80 metres of water, contains existing proven oil reserves.
According to Poll, the field lies on trend regarded as the most prospective oil and gas trend in The Philippines. The trend is home to several oil and gas fields, including Shell’s 200 million barrels, 3.5 trillion cubic feet Malampaya oil and gas field.
In exchange for the 50% interest, Ottoman will pay the consortium $200,000 – representing the direct and indirect costs incurred in maintaining the licence for the past three years – and issue the group an initial 2 million 20c shares and 1 million 20c options. A further 5.5 million 20c shares and 2.75 million 20c options will be issued to the group upon re-entry
The Calauit fields have been in production before, back in 1997, when a 155-day extended production test on Calauit 1B returned water-free production of 6500 barrels per day from two fracture zones.
The production test came to an end when attempts to increase production significantly overextended the equipment and led to water coning through the fractures.
Ottoman and AustralAsian plan to use horizontal drilling to circumvent the problem of water coning. The partners, having identified 25 fractures along a 1km section of the field, aim to extract 600 barrels per day from each fracture using a horizontal well – a mild extraction rate that is expected to prevent any water encroachment until “at least significant depletion of the reservoir has occurred”.
Poll says Ottoman's engineers estimate the partners could get 15,000bopd, but the company was assuming a production rate of 7,500bopd.
“Taking an oil price of $US35 per barrel would give us a gross revenue of $260,000 per day. Allowing $125,000 per day to lease the whole production set-up, we can have the cost recovery of our investment within 47 days," he said.
Using a prevailing oil price of $US35 per barrel, the project breaks even when producing 3500bopd. Adopting a price of $US45 per barrel shifts the break-even production level to just 2777bopd.
The previous operators of the field calculated “a contingent resource of 28 million barrels of oil in place in Calauit 1B and a further 22 million barrels in Calauit 1A”.
But the joint venture partners consider this estimation on the high side, and have commissioned a geotechnical review to gain a picture of the reserve base that complies with SEC and Australian guidelines.
In the meantime, the partners have been running their projected economics at “significantly smaller numbers” than those calculated by the former operators.
Ottoman is also considering other Philippines prospects but Poll maintains that the company’s Turkish projects would remain the company’s “bread and butter".
