A Philippine company revived talks with China National Offshore Oil Co. Ltd., an upstream oil and gas company owned by the Chinese government, over an exploration project in South China Sea after President Rodrigo Duterte pursued more amicable relations with China.
Manuel Pangilinan, chairman of Philex Mining Corp. and subsidiary PXP Energy Corp., said the more conciliatory environment encouraged his group to initiate talks with CNOOC.
“I think to the extent that the government has adapted a more friendly, more conciliatory push to China, I think the atmosphere has become better for a resumption of a discussion with China in general. And we’d like to move in that direction,” Pangilinan said.
Pangilinan said PXP initiated talks with CNOOC on how best to move forward on service contract 72 (Recto Bank), but clarified the tenor of discussions should be bound by Philippine and Chinese laws.
The Philippines and China have overlapping claims over South China Sea, which is also known as the West Philippine Sea. Exploration of SC 72 was halted following tension in the area two years ago.
PXP Energy, formerly Philex Petroleum Corp., controls Forum Energy Plc which holds a 70-percent stake in SC 72.
“We as a Philippine entity cannot violate our law. Nor certainly not our sovereignty. We can’t do that so we have to stay within Philippine laws, within Philippine sovereignty,” Pangilinan said.
Forum is a contractor of the government while the oil and gas resources belong to the government, he said.
“After you’ve arrived at a business arrangement, it has to be within the context of Philippine laws and Chinese laws,” he said.
Pangilinan urged the Energy Department to review and lift the moratorium imposed on SC 72 to enable Forum to conduct preparatory works for exploratory drilling in the area.
The Permanent Court of Arbitration in The Hague ruled on July 12, 2016 on the maritime case filed by the Philippines against China in favor of the Philippines. The Recto Bank where SC 72 lies, is within the Philippines’ exclusive economic zone as defined under the United Nations Convention on the Law of the Sea.
“We still need one more seismic survey partly to complete the totality of the survey. We want to be able to determine the baseline environment conditions on where we’re supposed to drill and we have to establish he stability of the soil underwater if we were to eventually put an oil rig there. So we need a survey for that,” Pangilinan said.
He said Forum needed to conduct two exploratory wells under its work program but could only do so, once the moratorium was lifted. “Not without the permission of the government. And then we can only do that as well without somehow the cooperation of CNOOC,” he said.
“It’s up to them to release the moratorium. If they do, then we’ll advise the Chinese that we’re gonna do this. This is our work program approved by our government,” he said.
SC 72, which covers an 8,800-square-kilometer area west off Palawan, is estimated to contain prospective resources of as much as 16.6 trillion cubic feet of gas and 416 million barrels of oil.
PXP Energy incurred an audited consolidated net loss attributable to equity holders of the parent company of P22.4 million last year.
“The lower net loss was primarily attributable to a 75.7 percent reduction in overhead resulting from management’s continuing cost reduction efforts and a recovery in impairment loss, net of lower petroleum revenues contributed by its subsidiary, Forum Energy Ltd., arising from the decline in oil output and lower oil prices,” the company said.
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