Otto-Led Consortium to Drill in South China Sea

An Australian-Filipino consortium led by Otto Energy Ltd is set to drill a deep-water exploratory well in the South China Sea, a company director said on Monday, in the hope of discovering commercially viable oil reserves.

Australia's Otto, operator of Service Contract 55 (SC55) with a 78.18 percent interest in the permit issued by the Philippines' Department of Energy, will start drilling operations sometime in July or August, Rufino Bomasang told Reuters.

The Philippines' Armed Forces is assuring the security of the consortium that includes Red Emperor Resources NL of Australia with 15 percent interest and Palawan 55 Exploration and Production Co, a unit of the Philippines' Trans-Asia Petroleum Corp, with 6.82 percent.

SC55 covers Hawkeye-1 well located in the southwest Palawan Basin in southwestern Philippines, an area believed to be rich in hydrocarbon deposits.

"That area is outside China's Nine Dash Line, so we're not really concerned about security issues," Bomasang said. "It's well within Philippine territory."

At a media briefing on Monday, military spokesman Lieutenant-Colonel Noel Detoyato, said the Philippine Navy would be in charge of security but declined to give the specific assets to be deployed for security reasons.

"We have to guarantee (their safety) because they are within the Philippine waters ... As long as its (drilling) within the Philippine waters, the Philippine Navy will secure those who are involved in economic activities," said Detoyato.

A lawmaker, LPG Marketers Association party list Rep. Arnel Ty, said in a statement the super deep-water drill ship Maersk Venturer would start the drilling on Aug. 1, immediately upon arrival of the foreign ship.

In March 2011, Chinese ships harassed a Department of Energy ship conducting oil exploration at the Reed Bank or Recto Bank in the South China Sea. The ships left after the military's Western Command deployed bomber aircraft.

The Chinese ships told the DOE ship to stop their activity and leave the area which they claimed to be part of China. Reed Bank is well within the county's 200-mile exclusive economic zone.

Reporting by Enrico dela Cruz and Manuel Mogato