Announcement of Philippine Geothermal and Petroleum Explorations Supported by World Bank Loans on October 1, 1982

I , FOR IMMEDIATE RELEASE • World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 83/12 Contact: Thomas A. Blinkhorn October 1, 1982 (202) 477-4685 PHILIPPINE GEOTHERMAL/PETROLEUM EXPLORATIONS SUPPORTED BY WORLD BANK LOANS In an effort to help stimulate the development of new domestic energy sources in the Philippines, the World Bank has approved loans totalling $73.5 million for a geothermal exploration project and a petroleum exploration promotion project. The two projects, together with one approved last June for coal ~ploration (involving a Bank loan of $17 million), represent a significant broadening of Bank lending for energy development in the Philippines. Previous Bank lending in the energy sector was focussed entirely on the power subsector, through seven loans for power generation and transmission and one loan for rural electrification. Oil imports in the Philippines rose to about $2.4 billion in 1981, (equivalent to about 30% of total foreign exchange earnings) and the country sees • a critical need to sustain the pace of exploration and development of its indigenous energy sources. The Geothermal Exploration Project is intended to help set the stage for further development of the country's substantial geothermal resources. The Philippines is second only to the United States in geothermal power production. The project will be executed by the Philippine National Oil Company (PNOC). Total project cost is estimated at $71.5 million, of which the Bank loan of $36 million will finance 80% of the foreign exchange component. Technical assistance totalling about $1 million is being provided by New Zealand, Japan, and Italy. The principal objective of this project is to determine through exploratory drilling the commercial viability of geothermal prospects at Bacon-Manito (southern Luzon) and Palinpinon (southern Negros). Test wells in other prospective geothermal areas in close proximity to the Manila market are also included as well as economic policy studies. This project will complement private sector activities in exploring and developing geothermal fields in the Philippines. Three foreign companies and PNOC are currently active, and 559 megawatt capacity has already been installed with an additional 225 megawatts under construction. The project will provide a basis for facilitating future geothermal agreements with the private sector and for the rank1.ng of areas for exploration and subsequent development, including other uses of geothermal gteam • • NOTE: Money figures are expressed in U.S. dollars. . .. /  -2- The Petroleum Exploration Promotion Project aims at reviving oil • industry interest, both foreign and domestic, in petroleum exploration in accordance with the long-standing policy of the government. This project consists of two separate loans: $13.5 million to the government for use by the Bureau of Energy Development (BED) and $24 million to PNOC. The BED loan will finance the foreign exchange component of a $16 million project consisting of aeromagnetic surveys, offshore seismic reconnaissance surveys and integrated geological studi6s designed to clarify and enhance the geologic understanding and petroleum prospects of the country over and above the current area of petroleum exploration activity (principally offshore Palawan). These results w~ll be made available to interested oil companies. The PNOC loan will finance the direct foreign exchange component of a $54 million project comprising onshore seismic studies and possible exploratory drilling in PNOC areas in Mindoro, Cotabato,and Cebu where small discoveries, insufficient to attract foreign investors at this time, may be made. Attempts will be made to interest private oil companies in joint-venture agreements with PNOC during the exploration of these areas. The loans for the Petroleum Exploration Promotion Project and the Geothermal Exploration Project will be made with the guarantee of the government for periods of 20 years, including an initial five-year grace period. The • geothermal loan will carry a variable interest rate while the petroleu·n loan will have a 11.6% fixed interest rate. A capitalized front end fee of $0.5 million is included in the geothermal loan and $0.6 million in the petroleum loan. - 0 - •