FINDING OIL IN PHILIPPINES MAY BE EASIER THAN SELLING IT

FINDING OIL IN PHILIPPINES MAY BE EASIER THAN SELLING IT

International oil companies may be antsy about selling their product in the Philippines. But legal uncertainties don't seem to be deterring them from hunting for more in the area.

Within 24 hours, two U.S.-backed international consortia announced plans to drill new oil and gas prospects, one onshore and one off.The Arco Philippines Inc. unit of Atlantic Richfield Co. of Los Angeles heads a group of 15 set to tackle an area in the southern Sulu Sea near Borneo.

Recoverable reserves are estimated by the energy department at 51 million barrels of oil and some 1.4 trillion cubic feet of natural gas.

Among firms working with Arco are Philodrill Corp., TransAsia Oil & Mineral Development Corp. and Oriental Petroleum & Minerals Corp. , all locally based.

Another group, led by the Alcorn (Production) Philippines Inc. subsidiary of Houston-based Alcorn International Inc., said it will begin exploration of 19,000 square miles on Leyte Island on the east-central edge of the archipelago.

Its partners are local firms TransAsia and Petrofields Exploration & Development Corp.

The Philippines, a heavy importer of crude, is thought to have considerable reserves in several offshore locations, though exploration has been hit-and-miss.

Some analysts say the lack of any sustained success in exploration has influenced the shifts of policy by various governments over the years, leading to uncertainty about returns.

NOT ALL ARE WINNERS

Similar confusion has stymied hopes by President Fidel Ramos to stimulate more activity in mining, long a mainstay of the Philippine economy, by outside investors.

As anywhere else, not every drill sunk comes up wet. In less than a month, the Shell Philippines Exploration BV unit of Royal Dutch/Shell plugged two potential sites as dry even though the locations are near proven fields.

Princesa 1 on northwestern Palawan was abandoned at 9,692 feet, and Cliffhead-1 in southwestern Palawan at 7,420 feet, a company spokesman said.

Of more concern to oil companies is how to sell profitably what they find or import. As reported, a deregulation law enacted by Mr. Ramos last year was

ified months later by the supreme court as unconstitutional.

Efforts to draft a new and legally acceptable statute have bogged down in the legislative mire, hardly uncommon here.

PESO DIP PAINFUL

There are three main players in the downstream industry, and several more have indicated they'd like to join.

In the absence of deregulation, which would allow oil companies to set their own prices, the big three won approval for increases to cover losses incurred as a result of the local currency having lost some 40 percent of its value against the dollar since last summer.

Legislators are sensitive to the impact of any oil price increases, particularly on gasoline, diesel and bottled gas.

National elections are due in May, adding to the reluctance to vote for higher prices.

In mid-January, unidentified men sprayed automatic gunfire at the office of one oil distributor and tossed a grenade at the building of another. No one was hurt and damage was minor.

Petron Corp., the Philippines' biggest refiner, reported a net loss for last year of 631 million pesos ($15.77 million), largely on depreciation of the peso. That contrasted with a profit of 4.2 billion pesos in 1996.

PREDICTING A LOSS

The government and Saudi Aramco each hold 40 percent of Petron, which dominates the market, with about a 40 percent share.

Caltex Philippines Inc., a unit of Caltex Inc. of the United States, says it's reviewing import plans for both crude and products.

Vice president Frank Cruz cited the firm's ''inability to recover the additional costs.''

The firm is forecasting a loss of 2.3 billion pesos for 1997.

Caltex, a joint venture between Texaco Inc. of White Plains, N.Y., and Chevron Corp. of San Francisco, ranks third among refiners here.