Is a win-win solution in the South China Sea at hand?

"Let's wait and see how events unfold from hereon."

We were skeptical when Energy Secretary Alfonso Cusi said recently that oil exploration firms are free to decide whether or not to resume their oil exploration activities at Reed Bank in the South China Sea (SCS).

What if China decides to prohibit exploration activities in the area?

“That is the decision they have to make, whether they want to do work or not,” Cusi said when asked if exploration firms may not be allowed to resume exploration activities since the lifting of the moratorium was a unilateral move.

“The lifting of the moratorium was a unilateral decision, based on what the country needs. That is the country’s territory. We gave instruction to resume work. They submitted a work plan. We are making them accountable. If they fail, we will take the necessary action,” said Cusi.

But our skepticism appears to have been misplaced, because no less than former Senior Associate Justice Antonio Carpio, a staunch critic of China's claim of sovereignty over nearly all of the SCS, has declared that China has agreed not to interfere with Philippine exploration in Reed Bank, also known as Recto Bank, located in the West Philippine Sea.

He was even more optimistic, saying this agreement could would eventually lead to the settlement of maritime disputes there.

China’s President Xi Jinping and President Duterte signed the Memorandum of Understanding on November 20, 2018. Under this agreement, China promised to shoulder the cost of joint oil and gas exploration as it has the necessary technology, capacity, resources and capital to carry it out.

From what I gather, the lifting of the moratorium would allow three oil explorations firms, namely Philippine National Oil Company-Exploration Corporation, Forum Energy, and PXP Energy Corp., to resume exploration activities under, Service Contract 59 in West Balabac, Palawan; Service Contract 72, which covers Reed Bank, also known as Recto Bank; and Service Contract 75 in Northwest Palawan, respectively.

The DOE’s notice to resume work included a reminder for the contractors to stay within the 500-meter security zone in their area and follow all navigation rules to ensure safety.

Should China, which claims ownership over the area, decide to lodge a protest, Cusi gave the assurance that the Philippine government would “stand up for our rights.”

Before the lifting of the moratorium, PXP had entered into a memorandum of understanding with China National Offshore Oil Corporation (CNOOC) to jointly develop SC 72.  

PXP, Cusi said, is free to pursue discussions with CNOOC or explore other partners. “We’re not prohibiting that. That is part of their MOU to explore cooperation. They want to negotiate with CNOOC. I know they have been negotiating and that’s not a precondition for resuming the work. Whatever it is they are capable of,” he said.

Exploration works in Reed Bank had been suspended after the Aquino administration issued an order to that effect in 2012 amid rising tensions with China.

The Energy Secretary recently encouraged his counterpart Energy Ministers in the Asean to undertake their own joint oil and gas exploration and development. He also requested the Asean Council on Petroleum (ASCOPE) to revisit existing sharing agreements on oil and gas exploration and production, and to recommend similar or modified agreements for possible adoption.

Cusi's statements come close on the heels of President Rodrigo Duterte's approval of the Department of Energy’s (DoE) recommendation to lift the suspension of petroleum activities and resume exploration in the West Philippine Sea.

The Malampaya Gas Field near Palawan that has been supplying one-fourth of the country's energy needs since 2002 is expected to dry up starting in 2024. Data as of 2013 from the United States Geological Survey said the South China Sea contains approximately 11 billion barrels of oil and 190 trillion cubic feet of natural gas in proved and probable reserves. The US Energy Information Administration estimates that Reed Bank alone contains some 5.4 billion barrels of oil and 55.1 trillion cubic feet of natural gas, and holds the world’s biggest natural gas deposit in the world. 

While the 2016 ruling of the Permanent Arbitration Tribunal in The Hague, Netherlands said Reed Bank is part of the Philippines' exclusive economic zone (EEZ), or the area 200 nautical miles from a coastal state's baselines where the coastal state has the exclusive rights to fish and exploit resources, China does not recognize the international body nor its ruling. 

While China ignored the ruling, Carpio said “recent developments indicate that there may be light at the end of the tunnel.”

“The MOU and TOR arrangement will satisfy the objective of the Philippines to preserve its sovereign rights in the EEZ in the West Philippine Sea…China, through its state-owned enterprise CNOOC and CNOOC’s partners, (will) get 40 percent of the net proceeds of the gas in Reed Bank. It will be a fair and just arrangement satisfying China’s objective of a win-win solution in the South China Sea dispute,” he added.

Let's wait and see how events unfold from hereon.

ernhil@yahoo.com