news article - business world

http://www.bworldonline.com/main/content.php?id=10275

Tindalo block off Palawan set to start crude oil production
COMMERCIAL production in an oil block off Palawan is set to start after a drill rig that will extract oil arrived last week, the Australian operator of the block said.

Field operator Nido Petroleum Ltd. told the Australian Stock Exchange last week the jack-up rill rig Aquamarine Driller is already preparing to drill for oil.

?The rig is now preparing to enter and complete the well in preparation for well testing,? Nido Petroleum said.

Nido Petroleum said the Floating Storage and Offloading (FSO) vessel for the block will also arrive soon.

?During the well completion activities, the Weatherford production equipment will be loaded and installed on the rig?s deck. The FSO, Tove Knutsen, will also arrive at location shortly and be connected via the floating hose in preparation to receive processed crude oil,? Nido Petroleum said.

Weatherford Asia Pacific Pte. Ltd. and Knutsen Shuttletanker Pool AS respectively are the Tindalo field?s FSO vessel and production processing equipment contractors.

The Tindalo oil field is located within Service Contract (SC) 54A in offshore Palawan.

The company expects to extract first oil in the field within the second quarter.

The drill rig is less than a year old and will have a production capacity of 20,000 barrels of oil per day once production equipment is fully installed.

Nido Petroleum is the operator of the field with 42.4% interest. Other owners are Yilgarn Petroleum Philippines Pty. Ltd. with a stake of 30.1%; Trafigura Ventures III BV, 15%; and TG World Corp., 12.5%.

The company earlier said it would spend $20 million to extract oil in the Tindalo oil field.

Nido Petroleum forecasts recoverable oil volume from the site at 5.1 million barrels and initial production rates of 7,000 to 15,000 barrels of oil per day.

By comparison, production at the Galoc crude oil field -- where Nido Petroleum holds a 22.879% interest and is presently the country?s largest commercial oil upstream project -- ranges from 12,000 to 14,000 barrels of oil per day.

SC 54 is located in the northwest Palawan basin and covers an area of 5,376 square meters. The Tindalo oil field was discovered in October 2008.

Nido Petroleum lost $28.3 million last year from a gain of $7.2 million the prior year due to higher cost of sales. The losses came even as oil revenues from the Galoc oil field, the company?s core income driver, went up to $46.2 million from only $7.2 million in 2008.

Nido has about two million hectares of exploration and development assets in the northwest Palawan basin.

Oil investors are entitled to a 70% share of revenues from production sales under the government?s fiscal regime for petroleum development.

The mechanism is designed to allow the contractor to recover investment costs.

The government will then receive 60% of the remaining 30% of revenues, with the remaining 40% divided over the companies involved in the project. -- J. B. F. Santos