Energy exploration dims further in West Philippine Sea

MANILA, Philippines — The possibility of oil and gas exploration in the West Philippine Sea dimmed further after the Philippines terminated talks with China over  joint  energy exploration   in the disputed sea,  as resumption of any activities could escalate geopolitical tensions.

Following the termination of negotiations with China, the Department of Energy (DOE) – in coordination with the Security, Justice and Peace Coordinating Cluster (SJPCC) for safety and security concerns – said in a statement over the weekend that it continues to pursue talks with existing service  contract holders so they can proceed with their work programs.

The government’s decision to halt discussions with China – at least under the Duterte administration – should not deter companies with service contracts (SCs) in the disputed waters from pursuing their work program, Energy Secretary Alfonso Cusi said in a text message to The STAR.

“SC holders are mandated to pursue exploration,” he said.

The DOE had put on hold activities in prospects in the West Philippine Sea last April pending clearance from the SJPCC.

At the time, the DOE agreed that prior approval of the SJPCC is required as a condition for any oil exploration activities in the West Philippine Sea, in consideration of “the political, diplomatic and national security implications of any activity” in the disputed waters.

When asked if SC holders can start resuming their work program after the April suspension order, Cusi said they may do so. “But they need to coordinate with DOE their activities,” he said.

Directly affected by the suspension order were exploration work in SC 72 and SC 75, both located in northwest Palawan where Manny Pangilinan-led PXP Energy Corp. directly and indirectly owns economic interest.

Officials of PXP Energy were not immediately available for comment on the possible resumption of exploration.

However, during the company’s stockholders’ meeting last week, PXP Energy president Daniel Stephen Carlos said the company remains hopeful that the work suspension is only temporary, adding that the company would continue to coordinate with the DOE on this.

SC 72 – or Recto Bank – is operated by Forum GSEC 101 Limited, a 79.13-percent subsidiary of PXP Energy’s unit Forum Energy Limited, with a 70 percent participating interest. PXP has a total economic interest of 54.36 percent in SC 72.

SC 75 in northwest Palawan is directly operated by PXP Energy with a 50 percent participating interest.

The decision of the Duterte administration to terminate joint exploration talks with China does not really affect the status quo, Energy Lawyers Association of the Philippines (ELAP) chairman Pedro Maniego said in a text message to The STAR.

He said talks can be even revived by the incoming administration of president-elect Ferdinand Marcos Jr., who said he would uphold the United Nations Convention on the Law of the Sea (UNCLOS) and the 2016 arbitral award.

However, resuming any exploration works in the West Philippine Sea could spell trouble as China maintains its hard stance on its claim in the disputed sea.

“Unless China respects the arbitral ruling in favor of the Philippines and recognizes our sovereignty and exclusive economic zone (EEZ) rights over the West Philippine Sea, it would be very risky for the government and especially the private sector to engage in any activities in the said area,” Maniego said.

“If our fishermen are not allowed to fish in peace in Panatag Shoal and our Coast Guard is likewise hindered from replenishing BRP Sierra Madre in Ayungin Shoal, China could be expected to prevent any oil and fossil gas explorations in the area,” he said.Energy.

Last month, the ELAP chairman said the Philippines should focus on developing liquefied natural gas (LNG) terminals – instead of pursuing oil and gas exploration in the West Philippine Sea

The DOE issued a moratorium on all exploration and drilling works in SC 72 and SC 75 in December 2014 and 2015, respectively, amid the rising maritime tension with China.

It was only in 2020 when the agency lifted the force majeure for the oil and gas areas in West Philippine Sea and issued Resume-to-Work notices to the operators of SC 72 and SC 75.

Focusing on accelerating LNG development will allow the country to serve the fuel requirements of gas-fired power plants relying on the depleting Malampaya natural gas field, Maniego said earlier.

Operating since 2001, the Malampaya project is the only local producer of indigenous natural gas. It supplies fuel to around 40 percent of gas-fired plants in Luzon, powering around 3,457 megawatts (MW) of power plants that provide power supply to the Luzon grid.

While the contract will end in 2024, supply from the Malampaya gas field has started to deplete and is seen to be fully depleted by 2027 at the latest.