Malaysia's Mitra Energy Ltd is to extract oil deposits at a natural gas field operated by the Royal Dutch Shell Group off the western Philippines, a local partner said Thursday.

The oil field is part of the Malampaya gas field, operated by Shell in a consortium with Chevron and PNOC-Exploration Corp, a state-owned energy firm.

PNOC Exploration and Mitra Energy would start producing the Malampaya oil by the end of 2007, the Filipino partner said in a statement.

Mitra estimates up to 41 million barrels of oil can be produced over four years in a project that costs US$684 million.

Now underway

Negotiations between PNOC and Mitra on the details of their partnership are now underway.

Shell and Chevron earlier allowed PNOC Exploration to seek other partners in the Malampaya oil extraction project as they did not consider it commercially viable.

The Philippines only has a few small offshore oil wells that supply less than two percent of local demand.