"Energy shortage has hindered the Philippines’ march to massive industrialization."
The title of my column last Wednesday, is “An oil boom?”. It should have been “A natural gas boom.” And without the question mark.
On Oct. 12, 2020, the Department of Energy announced that President Duterte has lifted the moratorium on oil and gas exploration in the West Philippine Sea. Energy Secretary Alfonso Cusi called the lifting an exercise of sovereign rights of the Philippine government. He also said “we need to explore so we may address the country’s energy security.”
Such sovereign rights were in accordance with the Hague-based Permanent Court of Arbitration award in 2016 which rejected China’s nine-dash line territorial claim to reefs, isles, islands and waters in the South China Sea. Addressing the United Nations General Assembly on Sept. 22, 2020, Duterte said the arbitral award is “beyond compromise and beyond the reach of passing governments to dilute, diminish or abandon.” He firmly rejected attempts to undermine it. The Philippine government declared a moratorium on drilling in 2014.
Duterte, of course, has been the most pro-China of Philippine presidents. He needs loans, investments, tourist arrivals, and generosity that only the Chinese can extend in substantial numbers. The Chinese realize what they have in Duterte; they could not have had a better strategic partner to pursue Beijing’s vigorous policy to expand its sphere of influence in Asia, the Pacific and beyond and erect a stumbling block to America’s pivot-to-Asia gambit.
Given that scenario, Duterte seemed confident enough to order the resumption of oil and gas exploration in the WPS. The authorization gave a much-needed fillip to once dormant oil and gas exploration companies whose shares are listed in the local stock exchange. Their share prices doubled, tripled, even quadrupled on Oct. 19, from their March 2020 lows. At double to quadrupled market capitalization, I thought the speculative stocks were overpriced.
Well, probably not. Service Contracts 59, 72 and 75 in the West Philippine Sea cover waters in whose bottom are huge reserves of oil and gas. SC 59 in West Balabac, Southwest Palawan, is operated by the PNOC Energy Corp. It covers 1.476 million hectares.
SC 72 is in the Recto Bank and sprawls over 880,000 hectares. It is operated by Forum Energy. Recto Bank is 150 kms east of the disputed Spratly island group. UK’s Forum Energy holds a 70 percent interest SC 72. The Philex Group of Manuel V. Pangilinan had a 64.45-percent equity interest in Forum. Philex financed a $10-million seismic survey in SC 72 in 2011 to determine the area’s oil and gas reserves.
Meanwhile, SC 75 is in Northwest Palawan, covers 626,000 hectares and is operated by PXP Energy Corporation.
On Nov. 20, 2018, the Philippines and China signed a Memorandum of Understanding on Oil and Gas Development in the South China Sea. The idea is to promote cooperation and avoid conflicts in the WPS. In 2019, the two countries entered into a consultative mechanism to clarify their positions on oil and gas development under the 2018 MOU.
Prof. Rommel Banlaoi cites a combined study conducted recently by the DOE and the National Mapping and Resource Information Authority (NAMRIA). SC 72’s Reed Bank or Recto Basin can potentially provide 3.9 trillion cubic feet (tcf) of natural gas worth $19.9 billion. In addition, it has 35 million barrels of oil worth at least $2.1 billion. Plus 21 million barrels of oil condensates worth $1.2 billion.
Other studies indicate the natural gas reserves of the Sampaguita Field of the Recto Bank are as much as 16.2 tcf whose value could be as high as $100 billion (P4.8 trillion)—one-fifth of the size of the Philippine economy. This makes the country one of the biggest in the world in terms of natural gas reserves.
Energy-deficit, the Philippines needs 492,000 barrels of oil daily. Of that, 395,000 barrels are met by importations. The country spends more than $10 billion a year on oil importations.
The answer to the country’s energy shortage is natural gas and it’s available, cheap in the West Philippine Sea. The Malampaya Gas field will be used up by 2024. The Sampaguita Field, which is much bigger (5x), could fill up the slack.
Its energy shortage has hindered the Philippines’ march to massive industrialization resulting in stunted economic growth, high poverty incidence (among the highest in the world at 30 percent for several decades), high unemployment rate (the highest in ASEAN), and an unstable society (the communist and separatist insurgencies, each more than 50 years, are the longest in the world). Why? Lack of cheap, reliable and abundant energy sources.
Today, factories and households spend up to 20 percent of their cost on electricity and utilities. Philippine electricity is among the highest priced in the world.
If cheap natural gas is produced in the West Philippine Sea in massive quantities, then economic redemption for the Filipino will not be far behind.