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Investments like Aabar's needed to sustain Philippine economic growth

DUBAI — The increase to 64 per cent from 42.5 per cent of stake by Abu Dhabi's Aabar Petroleum Investments Co. in an offshore oil gas exploration block in the Philippines could help that country sustain economic growth which is primarily being fuelled by remittances from overseas Filipinos.

Aabar announced on Wednesday that its subsidiary Pearl Energy has become the operator of Ragay Gulf Service Contract 43 (SC43) following approval by the Philippine government of a deal on Monte Cristo-1 exploration well of Premier Oil Philippines.

The move marks Aabar's expanding interests in Southeast Asia, where its operations saw the rise in oil production and mainly made company revenues shoot up to Dh378 million in the second quarter compared to Dh186 million a year ago.

Investments similar to that in SC43 are needed to help keep the Philippine economy growing by 7-8 per cent, according to various analysts, who added that growth due to billions of dollars sent by overseas Filipino workers (OFWs) would only last 5-10 years. "We can't maintain an economic growth rate of seven to eight per cent by just basically throwing money to the economy," said HSBC economist Frederic Neumann, who visited Manila from Hong Kong on Tuesday.

Reporters in Manila quoted him as saying that while the Philippines' 7.3-per cent GDP (gross domestic product) growth during the first half of this year was a real achievement, the country still needs "investments to make it sustainable, and investment is what is sorely lacking".

An exploration, production and drilling company, Aabar took the share from Premier Oil, which now holds a 21-per cent stake, in exchange for footing the latter's share of the cost of drilling the well by the fourth quarter of this year.

"We are delighted to take over as operator of Ragay Gulf licence ahead of what we expect to be an exciting period of exploration drilling towards the end of the year," said Chris Gibson-Robinson, Aabar's vice-president for operations and new ventures in South Asia.

He added that an offshore reconnaissance seismic will be acquired in November, to investigate a potentially large reserves beneath a reef limestone off Nido, a town and marine reserve park in Palawan some 420 kilometres southwest of Manila.

Neumann, who expects this year's GDP forecast of 6.5 per cent to slow down to 5.5 per cent next year as the Philippine economy remains "vulnerable to shifts in remittances", noted a strong activity in the construction sector being financed by OFWs nearing retirement.