PNOC EC begins SSB-2 drilling in Cotabato Basin

September 15, 1999 PSE CIRCULAR FOR BROKERS NO. 2310-99 September 9, 1999 PNOC EC begins SSB-2 drilling in Cotabato Basin PNOC Exploration Corporation (PNOC EC) drilled early this morning its third well for the Cotabato Basin Exploration Project in Barangay Kulambog, Sultan-sa-Barongis, Maguindanao. The Sultan-sa-Barongis (SSB-2) well, located 2.3 kilometers northwest of the earlier drilled SSB-1 well, has been programmed to reach a total depth of 2,000 feet. prcd The top of the gas reservoir has been estimated to be at 850 feet and the Company expects to complete the drilling and testing of the well within 25 days. The SSB-2 well will test the lateral extent of the gas reservoir and ultimately confirm the gas volume potential. PNOC EC recently completed the drilling and testing of the SSB-1 well in Barangay, Tukanakuden and confirmed the presence of natural gas, the high quality of the gas reservoir and the good quality composition of the natural gas. The energy sector has been keeping a hopeful optimism for the hydrocarbon prospectivity of the area considering the initial results of the SSB-1 well. PNOC EC, however, cautioned that the gas find in SSB-1 is still premature to be declared either as commercial or non-commercial as definitive results would still have to be awaited on with the completion of the drilling and testing of SSB-2. "What the drilling of SSB-1 has more importantly achieved," says PNOC EC Chairman Ramon V. Mitra, "is that it has upgraded the potential of the Cotabato Basin into a more prospective area for petroleum." "This gives us even more reason to look more closely into the other petroleum prospects and leads we have previously identified in the basin," added PNOC EC President Rufino B. Bomasang An inventory of the possible natural gas content of the structures in the Cotabato Basin reveal up to 1.7 trillion cubic feet of natural gas. "Gas seeps are prevalent everywhere and many water wells and wildcat wells drilled in the area were gas charged," Mitra reveals. "A wide-diameter water well in S. K. Pendatun town in Maguindanao is still in fact discharging flammable natural gas (methane) since it was drilled 20 years ago." Sub-surface data obtained by PNOC EC geologists have indicated that the area has similar structures to the SSB prospect. Bomasang pointed out that ". . . while the gas find may not turn out as big as the Camago-Malampaya gas fields, the project still stands as a possible major provider of power to at least 200,000 households with its projected 60-megawatt generating potential." PNOC EC currently operates the country's first natural gas-fired power plant in Echague, Isabela which provides for the electricity needs of at least 10,000 households in four municipalities. PNOC EC hopes to replicate this experience in Maguindanao on a larger scale. PNOC EC actually started work in the Cotabato Basin since the early 1980's until the drilling of the Tukanakuden-1 well in Barangay Tukanakuden Sultan-sa-Barongis, Maguindanao from December 1995 to February 1996. PNOC EC is the operator of the project and its joint venture partners were PETRONAS Carigali Sdn. Bhd. (the exploration subsidiary of Malaysia's national oil company) and Petrofields Exploration and Development Co. Inc. (a local oil firm). Although the TKN-1 well did not encounter the targeted oil prospect, the drilling encountered gas shows which became the focus of PNOC EC's ongoing operations. PETRONAS Carigali eventually withdrew from the project in 1997 while Petrofields decided not to participate in the drilling of the SSB prospect. LibLex Mitra pointed out, "We hope that with the initial gas find from SSB-1, we could trigger the exploration of other potential onshore gas prospects in Mindanao and possibly other areas where earlier gas shows had not been followed through due to exploration companies' previous focus on oil." PNOC EC's gas exploration program is part of an overall program to develop the Philippine natural gas industry which will lessen dependence on imported energy, reduce the cost of electricity, usher the use of cleaner fuels and accelerate rural electrification programs. The Cotabato Basin covers an area of about one million hectares and includes parts of the provinces of Maguindanao, Sultan Kudarat, North and South Cotabato, Sarangani, Bukidnon and Davao del Sur.