DOE chief expects China to question lifting of oil exploration moratorium in West PH Sea

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Metro Manila (CNN Philippines, October 16) — Insisting that the lifting of the suspension of oil exploration activities in the West Philippine Sea was a unilateral move, Energy Secretary Alfonso Cusi now expects China to ask for an explanation.

“I’m sure that they will not just take it without raising a word. I’m sure they are going to write us and we will address that as it comes – na bakit natin nilift (on why did we lift it), and we will be answering that,” Cusi said in an online media briefing on Friday.

Cusi is co-vice chair of the inter-governmental steering committee that will supervise projects under the planned joint oil and gas exploration with China. The Secretary said he did not inform his Chinese counterparts about the resumption of activities under Service Contracts 59, 72, and 75, which cover areas within the Philippines’ exclusive economic zone that Beijing contests.

Service Contract 59 is in West Balabac, Palawan; Service Contract 72 covers Recto Bank, also known as Reed Bank; while Service Contract 75 is in Northwest Palawan.

On Thursday, the Department of Energy announced it had issued a “resume-to-work” notice to Philippine National Oil Company - Exploration Corporation, Forum Energy, and PXP Energy Corp. which hold contracts to these areas. The notice 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, Cusi said.

The Philippine Navy and Coast Guard will also guard the sites once the drillings resume.

“I’m sure China naman will respect our decision and sa pronouncement nga nila, na West Philippine Sea, which they call South China Sea, is an oasis of peace,” Cusi said.

[Translation: I'm sure China will respect our decision and in their pronouncements that the West Philippine Sea, which they call South China Sea, is an oasis of peace.]

When asked what would happen if China protests, Cusi said the government would “stand up for our rights” and take necessary action depending on the situation.

Lifting of moratorium paves way for joint exploration

Beijing claims almost the entire South China Sea, including parts of Philippines' EEZ where the country has exclusive sovereign rights. An international tribunal in The Hague ruled in 2016 that China violated these sovereign rights when it interfered with oil exploration and block Filipino fishermen in the area as well as built artificial islands in the West Philippine Sea.

China rejected the landmark ruling and President Rodrigo Duterte set it aside to allow economic activity in the contested area. He cited Beijing’s agreement to give the Philippines a 60 percent of revenues from the planned joint exploration.

Cusi said Duterte’s decision to lift the moratorium issued by his predecessor, former President Benigno Aquino III, which froze all exploration activities in disputed areas, would not affect the memorandum of understanding between the Philippines and China on joint oil and gas development.

“That will still support joint development because that will pave the way for those interested companies to join the licensees to participate in the exploration activities,” Cusi said.

The MOU states that the two countries agreed to accelerate arrangements for joint exploration in maritime areas in accordance with international law. It also provides that all negotiations done under the agreement "will be without prejudice to the respective legal positions of both governments."

Beijing had appointed the state-owned China National Offshore Oil Corporation as its representative in all working groups negotiating joint development terms. The Philippines, on the other hand, would assign the company with an existing service contract in the areas of joint exploration, which still to be determined. In the absence of such a company, the Philippine National Oil Company - Exploration Corporation would represent the country.

Local explorations

Cusi pointed out that the MOU does not prohibit the Philippines from resuming pending projects, including the Manny Pangilinan-led PXP Energy’s venture into Recto Bank, also known as Reed Bank, which is believed to huge oil reserves, near the Malampaya reservoir off Palawan.

The government considers the project as a possible replacement for Malampaya, whose natural gas deposits are expected to run out as early as 2027. Malampaya accounts for 20 percent of the country's power supply.

READ: Shell looking to sell its stake in Malampaya gas field

Exploration works in Recto Bank had been put on hold following the 2012 presidential order issued by Aquino amid rising tensions with China. Although the Philippines earlier offered Recto Bank for joint exploration with China, Cusi said Manila and Beijing have not agreed on any specific area or date for the project.

Shares at PXP Energy surged by nearly 50 percent this morning – hitting the limit allowed for daily stock price movements – after getting the green light to resume its project in Recto Bank.

Last month, PXP Energy applied to explore another area there in a bidding hosted by the DOE. Businessman Dennis Uy’s Udenna Corporation also submitted bids to explore two other areas in Recto Bank, on top of his entry into the Malampaya natural gas project.

Pangilinan's group operates Meralco, the country's biggest power distributor, while Uy owns retail gasoline chain Phoenix Petroleum. He also has shares in PXP Energy.

CNN Philippines' Melissa Lopez contributed to this report.