Seeking oil to go green

By Eric Watkins

LOS ANGELES, Mar. 28 – A few weeks back, Palau’s President Johnson Toribiong signed a law which aims to govern the prospecting, exploration, exploitation, development and production of oil and gas resources in his Pacific Island nation.

“God willing, perhaps Palau can now begin to realize some revenues from natural resources with which we have been blessed,” said Toribiong after signing the law in January. Work will be carried out by Houston-based Palau-Pacific Exploration.

The Republic of Palau lies 800 kilometers east of the southern Philippine islands, 800 km north of New Guinea, and 1,280 km southwest of Guam. The country is comprised of a 480 km-long archipelago which includes more than 200 islands. Palau’s 21,000 people live on just nine of them.

Palau is hardly a household name, but it soon could be given the prospects being discussed for the country’s potential oil and gas reserves. Of course, oil fever always tends to inflate things a bit, but there are some interesting prospects nonetheless.


A 2008 report by Houston-based consultants H.J. Gruy and Associates identified two potential oil reservoir zones. At the time, reserve estimates – which haven’t been publicly identified – indicated that the prospect could have “world-class giant” oil field reserve potential.

The Gruy report said that potential reservoirs, determined from seismic sequence stratigraphy, are thick Miocene age carbonate reef systems and that geochemical analysis confirms the presence of “thermogenic hydrocarbons.”

The report also said there are shallow gas reserves that can likely be viewed as a bail-out option to attempt to recover costs should the discovery of oil not be successful, since there is a market to utilize the gas for power generation in Palau to replace costly imported diesel.

Costly imported diesel? According to a report by the Asian Development Bank three years ago, imported diesel is the bane of Palau, as it is for many of the Pacific Islands that depend on supplies being shipped out from Singapore.

“Fuel to the region, except for Australia, New Zealand, and Papua New Guinea, is shipped from Singapore through entrepots in Fiji Islands and Guam,” the ADB report said.


“High shipping costs, intensive multiple handling through island primary ports, and small suboptimal shipment sizes all contribute to higher fuel prices in the Pacific,” the ADP report said.

In an effort to ensure that its budding oil industry is correctly on-track, Palau has been working with the World Bank to draft legislation to ensure that social and environmental concerns are considered and a means for the fair distribution of profits is set up.

But some people have questioned why the World Bank helped Palau develop fossil fuel resources when the island nation’s very existence is threatened by the burning of them.

One of them is Janet Redman, co-director of the Sustainable Energy and Economy Network, who provides analysis of the international financial institutions’ energy investment and carbon finance activities.


“It is gut-wrenching and kind of sickening that Palau has been put in this position by those who have developed on the backs of the country’s future,” Redman told Reuters in an interview. “We are contributing to the process of an entire country disappearing,” she said.

Several Pacific Islands are faced with rising seas and the prospects of their nations disappearing under the waves. In Kiribati, there is even talk of buying land in Fiji and relocating the entire nation to it.

When asked why the World Bank was helping Palau pursue oil, Silvana Tordo, the lead energy economist in the World Bank’s oil, gas and mining policy division had a ready answer.

“The choice of developing Palau’s resources is theirs, not ours. They will develop them with or without World Bank assistance. It is therefore important for the Bank to be part of the dialogue,” he told Reuters.


The law signed by President Toribiong was the result of the process involving the World Bank. But that’s no guarantee that things will turn out right for Palau, assuming the discovery of hydrocarbons in commercial quantities.

The best guarantee seems to be the determination of the president himself – a man who alerted the oil industry to the potential in his land, but who also recognizes that oil could be the means to a more sustainable energy future.

“If we find oil we will use the proceeds to make Palau a green country,” said the president, who three years ago announced at the United Nations General Assembly that his country had established the world’s first-ever shark sanctuary.

Contact Eric Watkins at

© Glamma Productions 2012


About Eric Watkins

Eric Watkins is a consultant specializing in oil diplomacy. A former journalist, Mr. Watkins's work has appeared in numerous leading publications including The Wall Street Journal, The Economist, The Financial Times, and specialist media such as Oil & Gas Journal, Middle East Economic Survey (MEES), and Lloyd's List.
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One Response to Seeking oil to go green

  1. Pingback: Watching World Energy | Oil Diplomacy

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