Service Contract No. 57 – Calamian

[adroth]

Administrator's note: This thread has a companion on the forum's FB extension here: https://www.facebook.com/groups/rpdefense/permalink/1404328862986290/

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From: http://pnoc-ec.com.ph/service-contract-no-57-calamian/

Service Contract No. 57 – Calamian

Project Location : Offshore Northwest Palawan

Nature of Project : Petroleum Exploration

JV Partners and Percent Equity :  China National Offshore Oil Company International Limited (CNOOC) – Operator  51%, PNOC EC 28%, Mitra Energy Limited (MITRA) 21%.

Project Description: SC 57 was awarded to PNOC EC on 15 September 2005. It covers a total area of 7,120 sq. km. in offshore Northwest Palawan and is situated around fifty (50) kms. northwest (NW) from the north-westernmost tip of Busuanga Island.

CNOOC farmed-in into SC 57 on 3 April 2006 acquiring 51% participating interest and operatorship while Mitra Energy farmed-in on 3 March 2006 getting 21%.  The Deed of Assignment to formalize their entry has yet to be signed by the President of the Philippines.

Brief Background : SC 57 is within the prolific NW Palawan block and is host to the Bantac I well, a non-commercial oil discovery by Occidental Petroleum.  With the farm-in of CNOOC and Mitra, additional 2,200 km. of 2D seismic data was acquired on top of the 3,300+ km. acquired by the previous contractors.

However, the request for approval of the Deed of Assignment to CNOOC and Mitra Energy has been pending since 2006 with the Office of the President (OP). SC 57 is currently under force majeure but exploration activities will resume once approval is granted.

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[adroth]

JV Partners and Percent Equity :  China National Offshore Oil Company International Limited (CNOOC) – Operator  51%, PNOC EC 28%, Mitra Energy Limited (MITRA) 21%.

Project Description: SC 57 was awarded to PNOC EC on 15 September 2005. It covers a total area of 7,120 sq. km. in offshore Northwest Palawan and is situated around fifty (50) kms. northwest (NW) from the north-westernmost tip of Busuanga Island.

CNOOC farmed-in into SC 57 on 3 April 2006 acquiring 51% participating interest and operatorship while Mitra Energy farmed-in on 3 March 2006 getting 21%.  The Deed of Assignment to formalize their entry has yet to be signed by the President of the Philippines.

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However, the request for approval of the Deed of Assignment to CNOOC and Mitra Energy has been pending since 2006 with the Office of the President (OP). SC 57 is currently under force majeure but exploration activities will resume once approval is granted.

By being party to the Service Contract, doesn't it mean that China is bound by the terms of that contract, which includes recognition of Philippine laws?

Doesn't this mean that this sets a precedent for China's policies within the WPS . . . at least from a legal standpoint?

https://www.doe.gov.ph/model-petroleum-service-contract-0

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W I T N E S S E T H; That:

WHEREAS, all Petroleum, Crude Oil, Crude, Natural Gas and/or Casinghead Petroleum Spirit of the Philippines belong to the State and their disposition, exploration, development, exploitation and utilization  is under the full control and supervision of the DEPARTMENT under  Presidential Decree No. 87, as amended, otherwise known as the Oil Exploration and Development Act of 1972 (the “Act"), Republic Act 7638 otherwise known as the Department of Energy Act of 1992, and Section 2, Article XII of the 1987 Constitution;

WHEREAS, the Act declares it to be the policy of the State to hasten the discovery and production of indigenous Petroleum through the utilization of Government and/or private resources;

WHEREAS, the CONTRACTOR desires and agrees to provide funds, and apply its appropriate and advanced technology and expertise to cooperate with the DEPARTMENT for the exploration, development and exploitation of Petroleum resources within the Contract Area and agrees to be subject to the laws and decrees of the Government and other rules and regulations of the DEPARTMENT in the implementation of the Contract;

NOW, THEREFORE, in view of the foregoing premises, the DEPARTMENT and CONTRACTOR hereby stipulate and agree, as follows:

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[adroth]

From 2011

DoE revisits China farm-in to SC 57
By: Abigail L. Ho - @inquirerdotnet
Philippine Daily Inquirer / 11:11 PM August 03, 2011

The Department of Energy (DoE) is working on accelerating the approval of the farm-in agreement that China National Offshore Oil Co. (CNOOC) signed with the Philippine National Oil Co. Exploration Corp. (PNOC-EC) for Service Contract 57, as this has been pending approval since its signing more than five years ago.

In an interview with reporters, Energy Undersecretary Jose Layug Jr. said the agreement was being reviewed.

In three weeks, all issues hampering the approval should already be resolved, enabling the DoE to submit its endorsement of the deal to Malacañang.

“It was pending before the previous administration in Malacañang, so they followed it up. We’re reviewing the documents and checking whether we can approve the application. The issues pertain more to administrative issues because there was a previous executive order that required certain processes. We need to clarify that,” Layug said.

“In terms of CNOOC’s financial, legal and technical qualifications, we don’t see any problems with that. We just need to sort out the processes required for the farm-in, since CNOOC is one of the most well-respected state-owned exploration companies (in the world),” Layug added.

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Read more: http://business.inquirer.net/10349/doe-revisits-china-farm-in-to-sc-57#ixzz4pYmYzGx8
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook

[adroth]

The President laid out his "red line" to Al Jezeera last year (see here): He will not compromise Philippine sovereignty. He EXPLICITY stated that he is not authorized to do so, and has publicly declared that any President the does is subject to impeachment.

Given that Duterte is a person who bends the law when he can, that admission of a limitation is significant. That means that any way forward that involves China -- assuming that that is the way we will go instead of dealing with either India or Russia -- will be within the confines of the Philippine constitution. Many posters on the FB extension appear to assume that any deal with China will be dictated by China, which flies in the fact of recent precedent that clearly shows that China is actually willing to defer to the Philippines on matters of sovereignty, as evidence by Service Contract 57.

[horge]

PNOC has held SC57 for over a decade, unable to exploit for two reasons:

1. It does not have the industrial capability to do so, and would have to farm out the work,
in which case the subcon might demand to buy-into a share of the operation or, IOW, turn
it all into a joint venture (JV). Think of how SPEX, Occidental Pet., etc. protect their assets.

2. China would throw a hissy fit over what they claim as their natural resources.


PNOC addressed the above two issues by "farming out" the heavy lifting to CNOOC, which
provided China with financial/mineral incentive to play along, but (expectedly) CNOOC
demanded to buy-into a share of the operation: hence the statement that CNOOC was
"farmed in". Ditto with Mitra.

We have to remember that this arrangement dates back to 2005, when PNOC/CNOOC/Mitra
started surveying SC57, which arrangement did NOT prevent China's aggressively asserting
its false claims of sovereignty over SC57 and much of the rest of WPS from 2006 to present.

Where recognition of Philippine sovereignty over SC57 is concerned, China is aloof
behind a triple blind:

1. CNOOC is a state-owned business, NOT a state agency
2. CNOOC is arguably only SC57 (sub)operator-in-fact, under PNOC's operation-by-law, kasi...
3. CNOOC has yet to actually formalize its buy-in, if the Deeds of Assignment aren't inked.

The fact that the Deeds of Assignment were in limbo for so long was good for China, and
evidence that China controls (and has controlled for some time) higher offices/officials in PH,
because such a limbo would allow CNOOC (and therefore China) to profit, without being
fully-answerable (as JV stakeholder) to Philippine sovereignty.

I wouldn't be surprised if the JV is also registered in China, with PNOC as farmed-in consult,
(with Mitra again included), to respect Chinese sovereignty over SC57, but said registration
is being kept hush-hush especially here in the Philippines.

You can look at it as China laughing at Filipinos for being so easy to play for fools...
but you also have to realize that ANY industrial partner, foreign or local, would play just as
hard to protect its interests vs those of PH.gov, and also realize that, ultimately:

1. PH.gov stands to reap substantial returns from such arrangements (see Malampaya/SPEX)
2. PH.gov couldn't reap said returns without resorting such arrangements.

[miggye]

Sir Adroth had previously asked me to see if CNOOC's position on the contract strengthened the hand of the Philippine Government on our claim to the EEZ by asking several international lawyers i knew (including my younger brother) on this matter. here was my answer...

Sir Adroth Singko, got their answer. And it's, Yes and No. No in the sense that CNOC could be looked upon as a private corporation, even if it is owned by China. As such, it's acknowledgement of the EEZ is considered non-binding to the Chinese government. Still, it does strengthen our case. They are all in agreement, however, that the UNCLOS ruling trumps even these agreements.

[adroth]

http://news.abs-cbn.com/focus/08/31/17/joint-development-might-legitimize-china-claim-in-west-philippine-sea-analyst

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Batongbacal said the Philippines must ensure that "whatever we agree to does not result in an acknowledgement of China’s illegitimate claim."

"That’s why any kind of bargain with China on this has to be really very well thought of, and the terms have to be very well-written in order to prevent that kind of even an implied recognition," he said.

"It’s bad enough that we have actually the official position very loosely declared by the President. When he said that China has this historic claim, that’s almost one step closer to acknowledging officially because he is the President of the country," he added.

Batongbacal supports Foreign Affairs Secretary Alan Peter Cayetano's statement that the energy department is now focused on allowing oil and gas exploration in "areas that are not disputed."
He said this would mean that Manila is "implementing and continuing to attempt to implement" the Hague ruling.

[adroth]

PH to have control over China in Service Contract 57
Published March 5, 2018, 3:49 PM
By Argyll Cyrus Geducos

https://news.mb.com.ph/2018/03/05/ph-to-have-control-over-china-in-service-contract-57/

Malacañang said that China would have to comply with Philippine laws in case the joint exploration in Service Contract (SC) 57 pushes through, as the area is under the exclusive economic zone (EEZ) of the country.

Presidential Spokesperson Harry Roque issued the statement days after he announced that there are two areas that may be subjected to joint exploration by the Philippines and China, namely SC 57 and SC 72.

Roque, in a Palace press briefing Monday, said that since SC 57 is under the Philippine EZ, China would have to comply with domestic laws.

“As far as 57 is concerned, they will comply with the decision with La Bugal [ruling]. They can participate in exploration and exploitation provided, as the decision says, we have ultimate control over the exploration and the development,” Roque said.

The Palace official also confirmed that China would be under the control of the Philippines during the joint exploration on SC 57.

“They’re only a foreign entity engaged in exploration and development. But they have to do it under Philippine laws,” Roque said.

“They will absolutely be subject to Philippine laws if it is [SC] 57. It would have to be the mining code. The domestic law of the Philippines will prevail over [SC] 57,” he added.

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According to the Philippine National Oil Company (PNOC), SC 57 was awarded to PNOC Exploration Corporation (EC) on September 15, 2005. It covers a total area of 7,120 sq. km. in offshore Northwest Palawan and is situated around 50 kilometers northwest from the north-westernmost tip of Busuanga Island.

However, Roque said the same does not apply to SC 72 as there is an ongoing dispute in the said area between the Philippines and China.

SC 72 was awarded to Sterling Energy Ltd in June 2002. It is located in the West Philippine Sea, west of Palawan Island and southwest of the Shell-operated Malampaya Gas Field. SC 72 covers 8,800 square kilometers.

“As to [SC] 72, the agreement on joint exploration will be governed by international law because there has to be a treaty to be signed between the Philippines and China first on the joint exploration before it can be implemented by juridical entities of the contracting states,” Roque said.

“That’s why if we enter into an agreement, we’ll have to spell out the respective rights and obligations of the parties by way of a compromise,” he added.

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[adroth]

How it all started

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PNOC, Chinese firm to invest P1.1B on oil, gas exploration project in Calamian Island
Rocel Felix () - September 8, 2005 - 12:00am

The Philippine National Oil Co. (PNOC) and its joint venture partner China National Offshore Oil Co. (CNOOC) will invest P1.1 billion ($20 million) over the next three years to undertake oil and gas exploration works in offshore Calamian Island in northwest Palawan.

"We feel very optimistic of finding new fields in the block," said PNOC president Eduardo Mañalac, adding that the Department of Energy is set to award a service contract to the consortium this week.

He said PNOC is also negotiating with CNOOC for the farm-in agreements to explore in Calamian, an area adjacent to the Malampaya gas field.

The service contract is an offshoot of an earlier agreement between PNOC and CNOOC last April for "upstream opportunities in the Calamian area."

The agreement, signed by Mañalac and CNOOC general manager Fu Chengyu, was forged during the recent state visit of Chinese President Hu Jintao.

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Read more at https://www.philstar.com/business/2005/09/08/295606/pnoc-chinese-firm-invest-p11b-oil-gas-exploration-project-calamian-island#sBG6XRQ0TqKt7XA3.99

[adroth]

Duterte EO removes obstacle to oil exploration deal with China firm
With Executive Order No. 80, public bidding is no longer required for PNOC Exploration Corporation to tap firms hoping to participate in its petroleum service contracts

Pia Ranada
@piaranada
Published 12:25 PM, May 30, 2019
Updated 10:45 PM, May 30, 2019

https://www.rappler.com/nation/231830-duterte-executive-order-removes-obstacle-oil-exploration-deal-china-firm

GREEN LIGHT. President Rodrigo Duterte issues an executive order on how third parties can be tapped for oil exploration contracts awarded to PNOC-EC. Malacañang file photo

MANILA, Philippines – A major roadblock to an oil exploration contract with a Chinese state-owned oil producer has been removed, thanks to a new executive order signed by President Rodrigo Duterte.

Executive Order (EO) No. 80, signed by the President on Tuesday, May 28, repeals an Arroyo administration EO that prohibits the Philippine National Oil Company (PNOC) from awarding farm-in and farm-out agreements for oil exploration, development, and production.

With former president Gloria Macapagal Arroyo's EO No. 556 (series of 2006) out of the way, Duterte is free to sign a deal that allows PNOC Exploration Corporation (PNOC EC) to partner with another firm to implement Service Contract No. 57 (SC 57).

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