UPDATE 2-Philippine says first oil from Galoc on June 16

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MANILA, June 10 (Reuters) - The Philippines, which is trying to cut dependence on imported oil, said on Tuesday that its 17,500 barrel-per-day (bdp) Galoc oilfield will come onstream next week with output aimed at local refineries.

"We are pleased to announce that the development of Galoc oil field is completed and that the first flow of oil is estimated to be commencing June 16, 2008," Energy Secretary Angelo Reyes told reporters.

The Philippines' newest oil field holds deep significance, not only for the Philippines whose meagre output it will hike by some 70 percent to slightly more than 40,000 bpd, but also for Otto Energy (OEL.AX) and Nido Petroleum (NDO.AX), two small indepependent Australian companies.

Otto Energy acquired a 31.38 percent stake in Galoc Production Co (GPC) last December, with European trader Vitol VIT.UL holding the remaining 68.62 percent.

GPC operates the Galoc field with a 58.29 percent interest. The remaining 41.71 percent is split between Nido Petroleum, with a 22.28 percent share, and several Phillipine partners.

Galoc comes as a relief for the Philippines, which is trying to cut its annual import bill of $6 billion and is reeling from soaring fuel and food costs which have pushed annual domestic inflation to record highs.

Galoc will also be Otto's Energy's first oilfield to come onstream.

"The Philippines will earn from the sales of crude oil which will be benchmarked at international prices and with domestic refineries being given the first priority," Reyes said. "Rather than be exported, it will be consumed locally."

Reyes said this would translate to $1.4 billion in foreign exchange savings for the country from the start of commercial production until the life of the well expires.

Galoc is said to contain 10 million to 20 million barrels of oil reserves, Reyes said.

"It must be mentioned that the oil we have in Galoc field is high-quality oil, it is light, non-waxy and it is medium content in sulphur," Reyes said. "It is premium oil and could be refined in local refineries here."

The new crude will provide the first major crude oil addition to the Asia-Pacific region.

The Philippines also wants to develop its Malampaya oil reserves -- estimated at 7 to 8 million barrels per day.

The Malampaya gas field off the coast of Palawan island in western Philippines, which supplies natural gas to three large plants, is the country's largest hydrocarbon discovery, supplying all of its natural gas.

Another big name that has taken a stake in the country's oil and gas exploration sector is Exxon Mobil Corp (XOM.N), Reyes said.