Sep 202014
 

http://wikileaks.org/cable/2008/09/08MANILA2238.html# them with others. See also the FAQs
Reference ID Created Released Classification Origin
08MANILA2238
2008-09-29 05:48
2011-08-30 01:44
UNCLASSIFIED
Embassy Manila

VZCZCXRO3561
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHML #2238/01 2730548
ZNR UUUUU ZZH
P 290548Z SEP 08
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC PRIORITY 1930
INFO RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNASE/ASEAN MEMBER COLLECTIVE
RHHMUNA/USPACOM HONOLULU HI
UNCLAS SECTION 01 OF 02 MANILA 002238

SENSITIVE BUT UNCLASSIFIED

SIPDIS

STATE FOR EB/IFD/OIA, EB/ESC, AND EAP/PMBS
DOE FOR TOM CUTLER
USDOC FOR 4430 ITA/MAC/DBISMEE/KBOYD
BANGKOK FOR REO JAMES WALLER
STATE PASS DEPT OF INTERIOR FOR USGS
STATE PASS USAID

E.O. 12958: N/A
TAGS: EMIN SENV ECON EINV PBTS PG RP
SUBJECT: PHILIPPINE GAS RESOURCES

REF: Manila 1838

¶1. (SBU) Summary: The Philippine Department of Energy has set
ambitious goals for increasing energy self-sufficiency to 60%, but
the country is unlikely to meet these goals. Potential significant
hydrocarbon reserves in the South China Sea could make an important
contribution to the Philippine energy situation, but regulatory
obstacles and conflicting territorial claims stand in the way of
aggressive exploration and development. Although the country has a
mix of other energy sources, none appear likely to make a major dent
in the current Philippine dependence on oil imports. End summary.

¶2. (U) High food and fuel prices recently thrust energy security
into prominence in the Philippines. Government officials have
called for less dependence on foreign energy, which currently supply
some 60% of the needs of the country. The Philippine Department of
Energy has recently announced its intention to increase the output
of domestic sources from the current 40% to 60% of total domestic
energy demand by 2014. To meet this ambitious goal, the Philippines
must increase oil and gas production by over 20%. Rapid expansion
of the offshore Camago-Malampaya oil and natural gas project would
be key to reaching this goal.

¶3. (U) The Camago-Malampaya project is the largest proven natural
gas deposit in the Philippines. It currently supplies about 95% of
the country’s natural gas. Natural gas accounts for about 7% of
total Philippine energy consumption. Natural gas from the offshore
fields is refined and sent through a 312-mile pipeline to three
onshore power plants, directly into the grid that supplies Manila.
These three power plants represent 20% of the country’s total
generating capacity. The Philippines does not import nor export
natural gas.

¶4. (U) The Camago-Malampaya fields contain an estimated reserve of
between 2.3 and 4.4 trillion cubic feet of natural gas. At the low
end, the fields are smaller than the proven reserves of Cuba, the
world’s 60th largest reserve. At the high end, the fields are
bigger than the proven reserves of Mozambique, the world’s 49th
largest reserve.

¶5. (U) Dutch-owned Shell discovered the Camago-Malampaya fields in
1990 and remains one of three partners in the joint venture that
operates the gas fields (the others are U.S. company Chevron
Malampaya LLC and the Philippine National Oil Company Exploration
Corporation-PNOC). The project began production in 2002 and is
expected to supply the domestic power industry with natural gas
until 2022.

¶6. (U) About 150 million barrels of oil may lie beneath the natural
gas deposits at the Camago-Malampaya fields. This is a sizable
reserve compared to Philippine production and trade figures. The
Philippines consumes 340,000 barrels per day, more than 10 times
what it produces. As a result, the country is a net importer of
318,800 barrels per day.

¶7. (U) Exploitation of offshore co-located gas and oil resources
requires sophisticated technology. As more natural gas is
extracted, it becomes harder to remove the oil beneath it.
Geopolitical issues also impede development of reserves in the South
China Sea. The Camago-Malampaya fields are located about 80
kilometers off the northwest coast of Palawan, the westernmost
island in the Philippine archipelago, within the South China Sea
area claimed by China (see reftel). At present, China does not
object to its development, and there is an amicable relation between
the Philippine National Oil Company and the China National Offshore
Oil Company. China, the Philippines, and Vietnam have shared data
from the recently completed second phase of the Joint Marine Seismic
Undertaking.

¶8. (U) Accord to local petroleum industry executives, relatively
little test drilling has been done in the waters adjacent to the
Philippines in the South China Sea, even though experts believe
there are indications the area could contain large reserves. The
Philippines has restrictions on cost recovery in its petroleum
service contracts and other regulatory issues that make it a less
appealing place to explore for hydrocarbons than other countries in
the region. Consequently, the Philippines drilled far fewer offshore
well than have neighboring countries.

¶9. (SBU) The president of the Petroleum Association of the

MANILA 00002238 002 OF 002

Philippines recently explained to us several reasons for more robust
drilling in other ASEAN countries. He said the Philippine
government is slow to grant drilling concessions, and drilling
permits frequently require many months for approval. Further, he
added, most other ASEAN states allow companies to average expenses
between successful finds and dry holes. He also suspected that
cronyism has thrown the last several exploration permits to an
inexperienced, unqualified company.

¶10. (U) As reported reftel, under the UN Convention on the Law of
the Sea, the Philippines has until May 2009 to delineate its
archipelagic borders and establish its Exclusive Economic Zone.
According to some politicians, failure to meet this deadline could
jeopardize Philippine claims to these resources.

¶11. (SBU) Comment: To achieve its energy goals, the Philippines
needs to encourage more exploratory drilling in adjacent waters by
technically competent companies. The increased emphasis that
regional economies now place on controlling proximate strategic
resources could lead to increased regional cooperation in exploiting
these resources. End Comment.

   

 

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