Spratly oil deal on hold

The government has shelved its plan to explore and develop, jointly with China and Vietnam, a large area in the disputed and potentially oil-rich Spratlys, years after it drew flak for entering into such a deal. Critics had claimed that the deal undermined the country’s territorial integrity.

“We have not engaged in any activities to renew it,” Energy Secretary Angelo Reyes said of the joint marine seismic undertaking (JMSU) with Vietnam and China in the Spratlys, locally known as Kalayaan. The JMSU, signed in 2005, expired last July.

Reyes said the other signatories have not formally signified their intention to abandon development plans for the area.

“The JMSU has lapsed and has not been extended,” Reyes told reporters earlier when asked about the status of the JMSU.

“We are not talking about its renewal,” he added.

The government earlier tasked a special committee to look into the possibility of extending the agreement.

The PNOC-Exploration Corp., a gas and oil exploration unit of the state-owned Philippine National Oil Co. (PNOC), signed the pact for the government in July 2005 with its counterparts in China and Vietnam.

PNOC-EC’s co-signatories to the deal were China National Offshore Oil Corp. and PetroVietnam.

The Arroyo administration defended the signing of the deal, saying it would transform a potential regional flashpoint into a zone of peace and development.

Under the agreement, China was assigned to gather seismic data while Vietnam’s and Philippines’ tasks were to process and interpret the information. 

In December 2007, PNOC-EC, CNOOC and PetroVietnam started the second phase of the joint study, which aimed to assess the petroleum potential of an area in the South China Sea.

The first phase of the seismic survey commenced on Sept. 1, 2005 and ended on Nov. 16, 2005 and covered more than11,000 kilometers.

PNOC president Antonio Cailao earlier said that the agreement with China and Vietnam was not new to the company, saying it had previously engaged in similar contracts with other foreign companies.

Sources said that in the last PNOC board meeting, the issue was not discussed.

PNOC-EC chairman Jacinto Paras earlier revealed that the JMSU was “being held in abeyance.”

“With the controversies, we are not moving,” he said.

The fate of the JMSU is crucial to exploration firms with interests in the areas near the Spratlys. For instance, Forum Energy PLC had expressed optimism that it could bag one contract in the so-called Sampaguita prospects off Palawan upon the expiry of the tripartite agreement.

In an earlier statement, Forum Energy chairman Alan Henderson said the firm hoped to convert its geophysical survey and exploration contract (GSEC) 101 into a service contract.

“Whilst the process of conversion has taken some time, the company is informed, and believes, that a positive outcome will be reached in a relatively short timeframe,” Henderson said.

In 2006, then Senate president Manuel Villar Jr. said the chamber would review the joint oil exploration agreement to determine if it would threaten the country’s sovereignty.

“I myself believe that the Spratlys agreement should be investigated to determine why China is given such special privilege and what are the concessions behind this,” Villar said.

“It seems we broke rounds with the Association of Southeast Asian Nations. It’s the ASEAN which negotiates with China as a block. How come the Philippines went on its own?” Villar said.

If the deal turned out to be onerous, Villar said it would be another impeachable offense for President Arroyo.

The senators also suspected that the deal was a “precondition” to the bilateral loan agreements granted by China to the Philippines to finance the governments’ other projects.

Opposition Rep. Roilo Golez had also called attention to an article in the Hong Kong-based Far Eastern Economic Review criticizing the agreement as a “sellout” on the part of the Philippines.

The article was written by Barry Wain, a researcher in the Institute for Southeast Asian Studies in Singapore.

Wain claimed that the agreement gave legitimacy to China’s claim to most of the South China Sea.

He said the Philippines, being “militarily weak and lagging economically, has opted for Chinese favors at the expense of ASEAN political solidarity.”

He said the agreement violated the spirit of the 2002 ASEAN-China Declaration of the Conduct of Parties as it was concluded without consultation with other countries claiming the Spratlys.