MVP: Oil, gas exploration in SCS could resume soon

MANILA, Philippines - Oil and gas exploration in the disputed South China Sea by PXP Energy Corp. could resume soon, owing to the “more open and friendlier” relations between the Philippines and China, according to company chairman Manuel V. Pangilinan.

“I can just describe the general context under which we can move forward and the environment looks pretty positive,” Pangilinan told reporters after attending the “ASEAN at 50: The Way Forward” forum in Makati City yesterday.

PXP Energy holds the right to drill in Reed Bank, locally known as Recto Bank, which is disputed by Manila and Beijing.

The project was put on hold after the Philippines pursued international arbitration over territorial disputes with China in late 2014.

“I think there are indications that there could be gas in the area,” Pangilinan said. 

Last year, the Permanent Court of Arbitration in The Hague ruled in favor of the Philippines, dismissing China’s “nine-dash line” claim over the South China Sea. 

Beijing has refused to recognize the ruling. 

The decision clarified Philippine sovereign rights to access offshore oil and gas fields, including Recto Bank, within its 200-mile exclusive economic zone. 

PXP had been talking with China National Offshore Oil Corp. about a joint exploration and development of the Recto Bank during the Aquino administration.

“That’s a tough question because you appreciate it’s a very delicate situation,” Pangilinan said when asked if PXP Energy was talking to the Chinese side.

Gov’t decision needed

Pangilinan further emphasized the need for the Philippine government to start deciding on lifting the moratorium on oil and gas exploration contracts in Recto Bank to be able to meet the country’s natural gas requirements once the Malampaya gas project starts running out of supply.

He stressed the urgent need to determine whether there is gas of commercial quantity in Recto Bank, ahead of the Malampaya depletion.

“Frankly, we need confirmation that indeed Malampaya will run out completely by 2024 and when it will run out completely, we have no idea. We’re hearing 2029. But it will start running out pretty soon. The country has to plan for that and hopefully put it in sync with the development of Reed Bank,” Pangilinan said.

“If (gas quantity) is close to, equal or better than (Malampaya), obviously, it’s something. From a purely commercial perspective and setting aside political aspects, then I think we should try to determine whether there’s gas or not,” he added.

Service Contract (SC) 72 in Recto Bank is controlled by Pangilinan through London-listed Forum Energy PLC, which holds a 70-percent interest in the prospect.

His company, PXP Energy Corp., also has a direct operating interest of 50 percent in SC 75 northwest Palawan.

In order to start work in those areas, Pangilinan said they would need a signal from the government lifting the moratorium so they can start sending survey vessels and an oil rig to explore wells.

The Department of Energy 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.

“We don’t want to be in the middle of (a) geopolitical issue,” he said. “I think it’s about time for us to engage the government, particularly (Foreign Affairs) Secretary (Alan Peter) Cayetano, whether we could actually get the government to permit us to restart the works that were postponed. We should be doing that because all the pronouncements that appear to have been made by China and the Philippines are moving toward a positive direction.”

Energy Secretary Alfonso Cusi said, however, that the moratorium stays until the territorial dispute is completely ironed out.

“We are still in the same state (but) we are looking for ways to proceed with the exploration, the lifting of the moratorium,” he said.

“On the diplomatic front, it’s DFA taking care of that. (At the DOE,) we are evaluating all the options. We are looking for a strategic direction that will be a win-win for all that will not cause any problem.”