Fear of being eased out

"China has not closed its door to any negotiations in the seabed of South China Sea."


We are the only country in the world mired in an economic problem due to the expected depletion of our natural gas for which 40 percent of our electricity in the Luzon grid will be affected. Energy experts believe Malampaya would run out of natural gas by 2024. The unusual thing is that our politicians and some energy experts have been so politicized that they are creating a problem rather than finding a solution to it.

Our politicians and their acolyte analysts should seriously take into consideration the fact that Malampaya will soon run out of gas. Knowing this, we would either go through it the hard way of importing natural gas, or reaching an agreement to work a solution to allow both the Philippines and China to exploit that resource under the principle of joint venture following the win-win approach.

We cannot avoid dealing with our neighbor, and there is no reason why we should avoid doing so.. China has not closed its door to any negotiations in the seabed of South China Sea. Our politicians are in a quandary because they politically preempted their position that dealing with China would compromise our sovereignty, would economically bury the country deeper in debt, and would take us for a ride.

According to the Center for Strategic & International Studies, it is estimated that SCS holds about 190 trillion cubic feet of natural gas and 11 billion barrels of oil, most of which is along the margins of the South China Sea. The US Geological Survey in 2012 estimated that there could be another 160 trillion cubic feet of natural gas and 12 billion barrels of oil undiscovered in the South China Sea.

Despite the contrast of hope and pessimism, many of our politicians and political soothsayers continue to churn out propaganda and disinformation rather than work to convert our dispute into one of productive engagement. There are several foundations and study institutes that deal with the territorial, economic and political problems in the SCS. Aside from being openly identified as advocating the American view, none of them have come out to translate the problem to one of benefit.

Former Foreign Affairs Secretary Albert del Rosario initiated moves to make it impossible for this country to “Work Together to Build a Community of Shared Future for Mankind.” In April 1914, the country allowed the return and expanded the US military bases two of which are facing the SCS. In July 2016, the Philippines through the DFA surprisingly filed a case against China before the Permanent Court of Arbitration over the disputed islands in the SCS.

According to Dan Steinbock, Del Rosario organized the Stratbase Institute for Strategic and International Studies alongside with the Asian Maritime Transparency Initiative and the Center for Strategic and International Studies, a major think-tank close to the State Department, Pentagon and Wall Street. CSIS and AMTI were supported by Del Rosario’s ADRi and the Philippine Trade Foundation which is linked with the free market Foundation for Economic Development, Australia’s Foreign Affairs Department, USAID, World Bank, and Grover Norquist, an ultra conservative tax lobby.

Can the country pursue a joint cooperation with China without us invoking sovereignty in the Reed or Recto Bank? I ask this because it seems we are more determined in creating a problem than in finding a solution. First, we can never establish our sovereign right over an area submerged in water. Second, we should stop referring to the decision of the PCA to justify our claim of jurisdiction in the Reed Bank. We can never refer to the decision even inferentially for the fact that China refuses to recognize that body, and the PCA has no jurisdiction to enforce its decision.

To be more realistic, we can only assert our right over that portion of the Reed or Recto Bank that is our within the exclusive economic zone, example the enforcement of the 60-40 provision in our Constitution because China is a signatory to the United Nations Convention on the Law of the Seas. That portion is well within the 200-mile limit set by Unclos. Neither the Philippines nor China can impose their respective sovereignty in the area, for as stated sovereignty cannot apply to an area that is submerged. If occasionally rocks resurface during low tide, still it cannot be claimed territories to assert sovereignty for it is incapable of human habitation. Moreover, should we reach an agreement for joint venture with China, the government can insist that any sharing in the gas or oil that can be extracted within the EEZ should be in accordance with Section 2, Article XII of the Constitution.

The catch however is that the 60-40 formula is a two-layered formula. First, the formula applies if there is a joint venture between Filipinos and aliens whether referring to citizens or corporations. Second, if the joint venture involves foreign government or their corporations, the initial 40 percent shall be taken out in accordance to the provision of the Constitution/agreement provided it is well within the country’s EEZ.

Note that the percentage sharing of revenue in the Malampaya natural gas, Shell and Chevron each acquired a 45-percent share leaving the remaining 10 percent to the state-owned PNOC. This was clearly violated the 60-40 sharing formula set out in Section 2, Article XII of the Constitution. The share participation of PNOC should have been fixed to 60 percent. While some say, the majority of the stockholders are Filipino citizens, many suspect they are merely acting as dummies to circumvent the requirements of the constitution.

As a result, the 90-percent share holdings for both Shell and Chevron ultimately affected the revenue of the government that today it is believe payment barely represents 3 percent something of a paltry royalty fee long discarded by the Marcos administration under P.D. No. 87 or Amending P.D. No. 8 Promulgation of an Amended Act to Promote the Discovery and Production of Indigenous Petroleum. 

The big question is, will China allow the application of the 60-40 formula while its state-owned corporation, the China National Overseas Oil Corp. to operate alongside with foreign–owned corporations based in the Philippines and get their bigger share because of the 60-40 laid down in the Constitution? While China may get intact its 40 percent share of the agreement, the Philippines may not. The resulting situation would be odd for while the Philippines stands to get a bigger share than China because of the 60-40 formula, in the end, it will only get an average of three (3) percent of the revenue.

Thus, alleging China’s bid to control the known oil and gas deposits in the SCS is in truth a smokescreen to push the Philippines as front to secure US and their oil companies interest’s to get the a vast but untapped oil and gas reserves. The Philippines now serves a lynchpin for the US to take a more aggressive role in containing China from what the US media see as the alarming encroachment on our offshore islands.

This is clear in Steinbock’s observation, to quote him, “…CSIS/AMTI releases a commentary and satellite photos of contested sports in the South China Sea. Which leads to commentaries by ARDi’s members, which are then promoted in the Philippines, especially in the country’s foreign-owned media, such as Rappler (linked with the US-based North Based Media and billionaire Pierre Omidyar’s network) and by media properties close to Pangilinan/del Rosario and their allies. Next, these articles are heavily headlined in international media, which republish the pieces or interview their authors as “independent” Filipino voices, even if they are ARDi’s non-resident fellows and CSIS/AMTI authors in the US (e.g., Richard J. Heydarian).

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Topics: Rod Kapunan , natural gas , Malampaya , China , South China Sea
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