Cebu oil exploration firm taps contractor for production wells

By January 14, 2020Property News

CHINA International Mining Petroleum Co. Ltd. (CIMP), a unit of a Hong Kong-listed company, has tapped a contractor to start drilling six production wells in an oilfield up in the mountains of Alegria town in Cebu.
“After a continuous production for eight months, CIMP has already identified the primary production layers and wants to start drilling of production wells,” Polyard Petroleum International Group Ltd., the parent firm of the oil and gas exploration and production company, told the Hong Kong Exchanges and Clearing Ltd. and The Stock Exchange of Hong Kong Ltd.
Polyard said CIMP had completed the exploration stage for Service Contract (SC) 49 and had progressed into the production stage.
The turnkey drilling service agreement was forged on Jan. 11, 2020 with oil services company East Asia Oil Engineering Group Ltd. The deal is valid until Dec. 31, 2020.
Under the agreement, East Asia Oil will provide turnkey services to CIMP for the drilling of the six production wells. It will supply a full set of drilling equipment, including materials and personnel for well drilling, mud logging, wire line logging, cementing, testing, and related services.
Polyard said each of the production well, no matter if it is vertical or directional, would cost $815,000, or a total of $4.89 million for the six wells. It added that an 8% withholding tax is not included.
It said CIMP and the contractor had agreed that the final price will be settled after the completion of the six wells. If not all six wells are completed, the payment will be settled a month before the expiration of the drilling agreement or the completion of the last well drilled within the validity of the deal.
Also under the drilling agreement, CIMP agreed that the contractor can invest in an on-site refinery that can process 800,000 barrels of oil per annum.
“CIMP will offer lands for the setup and assist the Contractor in securing all relevant permits, clearances, and approval from the national and regional administrative offices, regulatory agencies, and local government units for the construction and operation of the oil refinery, including but not limited to all health, safety, and environmental permits, and immigration and customers clearances,” Polyard said.
“This would no doubt better the Company’s crude oil selling activities,” it added.
The exploration agreement comes after the Department of Energy (DoE) said in May 2018 that it was monitoring six exploration wells drilled by CIMP and its partners.
CIMP acquired 80% participating interest in SC 49 in southern Cebu and became its operator from July 1, 2009. Skywealth Group Holdings Ltd. holds a 16% interest, with Phil-Mal Energy International, Inc. holding the rest. Drilling of the sixth exploration well was completed in March 2018.
The Alegria oilfield covers a land area of 197,000 hectares, with about 42,749 hectares allotted to the production area.
In May 2018, CIMP launched the commercial operation of the first onshore oil discovery in the Philippines. The DoE had said that CIMP, a company 51% owned by Polyard, had invested $30.80 million in the SC 49 oilfield. — Victor V. Saulon