The Department of Energy said Nido Petroleum Philippines Pty. Ltd. has committed to spending an initial $72 million to drill two wells and carry out production tests in the Cadlao oil field in Palawan in its search for additional sources of oil.

"The DoE has given the go-signal to Nido Petroleum to proceed with the site survey to make sure that the activity is going to be safe. The operator already secured all the permits."

"There are other considerations about issuing other contracts but these have been finalized," Energy Undersecretary Alessandro O. Sales told reporters at a press briefing on Wednesday.

Based on its budget plan submitted to the DoE, Sales said Nido Petroleum intends to spend $16 million each for drilling two wells and another $40 million for carrying out the production test.

"The well costs $16 million each as per the budget they submitted. When they drill, they would test the floor to determine how to optimize future production. In total, the two contracts will cost $72 million," he said.

Last month, Australian firm Sacgasco, the operator of Nido Petroleum, said it is looking for more offshore oil projects in the Philippines — including an extended well test in the Cadlao oilfield under Service Contract 6B, which would revive its operations after it was discontinued in 1991.

According to Sales, Nido Petroleum already procured the drilling materials, and "things are moving forward according to schedule."

"In terms of the timeline, realistically speaking, in Cadlao we expect the well to be drilled by the first half, it could run in six months. We are looking very closely at the exploration well they are going to drill in Northwest Palawan," Sales said.

Amid its minimal impact on the country's fuel requirements, the DoE said reviving oil exploration activities sends a strong signal to foreign and local investors that the country's fiscal and regulatory regimes are stable.

"Just as an indication, in terms of volume in Cadlao, it can produce around 5 to 6 million barrels. In terms of actual impact, in fluid consumption, we consume 320,000 barrels in the Philippines. It's a small portion but what is significant is the signals we are giving the international investors," Sales said.

The Presidential Decree 87 or the Oil Exploration and Development Act of 1972, the old concession system was converted into a service contract system.

Under the service contract scheme, private capital, both foreign and domestic, was encouraged under a sharing arrangement in which 60 percent of production goes to the government and 40 percent to the service contractors.

Among the first beneficiaries of the measure was the Nido complex, which initially produced a total of 10,000 barrels a day from two wells. Its peak field production was 40,000 barrels a day, which was equivalent to 15 percent of the country's requirements then.