PH, China to work out how to tap oil, gas that both sides claim

[adroth]

PH, China to work out how to tap oil, gas that both sides claim
Published February 14, 2018, 2:42 PM
By Reuters

https://news.mb.com.ph/2018/02/14/ph-china-to-work-out-how-to-tap-oil-gas-that-both-sides-claim/

The Philippines and China have agreed to set up a special panel to work out how they can jointly explore oil and gas in part of the South China Sea that both sides lay claim without having to address the explosive issue of sovereignty.

China claims most of the South China Sea, where $3 billion in sea-borne trade pass every year, and has competing claims in various parts of it with Brunei, Malaysia, Taiwan, Vietnam and the Philippines.

“It’s just the start of a process,” Philippine ambassador to China, Chito Sta. Romana, told reporters late on Tuesday after diplomats from both sides met for the second time under a bilateral mechanism aimed at defusing longstanding maritime tensions.

He said the decision to form a working group on cooperating on energy was a “breakthrough”.

Forming an agreement for a joint project would be extremely complex and sensitive as both countries claim jurisdiction of the site of the oil and gas reserves, so sharing them could be deemed legitimizing the other side’s claim, or even ceding sovereign territory.

The idea of joint development was first hatched in 1986, but disputes and the sovereignty issue have stopped it from materializing.

But time is of the essence for the Philippines, which relies heavily on energy imports to fuel its fast-growing economy. That is complicated by estimates that its only domestic natural gas source, the offshore Malampaya field, will be depleted by 2024.

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[adroth]

Welcome gift to Xi: Oil exploration deal
By: Julie M. Aurelio - @inquirerdotnet
Philippine Daily Inquirer / 05:35 AM October 03, 2018

The Philippine government wants to sign a joint oil exploration agreement with China in the West Philippine Sea by November when Chinese President Xi Jinping visits Manila.

Malacańang said it was hopeful that a joint agreement would help pave the way for commercial oil production by 2027, which would reduce the Philippines’ dependence on foreign petroleum products.

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Setting conflict aside

< Edited >

He said the Philippines must set aside its territorial conflict with China and pursue joint exploration in the West Philippine Sea.

The proposed joint exploration agreement in the contested territory, according to Roque, could be signed when Xi visits Manila next month.

Earlier, the government said it was working on a framework for a possible joint oil exploration with China without the Philippines compromising its territorial claims.

“It is clear that we have to pursue joint exploration and set aside our territorial conflict,” Roque said.

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Read more: https://globalnation.inquirer.net/170200/welcome-gift-xi-oil-exploration-deal#ixzz5SrNLBk00
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook

[adroth]

The trap for the dragon is being set. Now . . . if only the nation can stay the course.

A strategy for winning, rather than a strategy for "how not to lose"

Previous posts have already established that open war and surrender are unacceptable options. These posts have also outlined how Justice Carpio's preferred "third option" -- which puts all its faith on the US-PH Mutual Defense treaty, without a proper assessment of how that treaty really works -- actually lacks a meaningful end-game. In the final analysis, the Chief Justice's much publicized pronouncements are more of a defeatist, "bahala-na", prescription for "how not to lose" rather than a proper strategy for winning.

To achieve what Carpio wants to do, Duterte's "4th option" -- which reduces PH-CN tensions while building up its economic defenses --  needs to be given the leeway to work. That means continuation of the administration's continued use of use of low-key -- bilateral -- communication. Demands for open diplomatic protest over China's infractions — despite the establishment of grievance mechanisms — are actually counter-productive, run counter to efforts to dial-down the rhetoric, and undo the progress made in support of the 4th option. The financial-deterrent built up as a result of engagement with China, as well as the windfall benefits for the AFP modernization program, would be undone . . . and we would be back where we started in 2016: Waiting for China to resume its island building campaign without any realistic strategy for keeping such a catastrophe from happening.

The goal of the 4th option is to give China a incentive to respect Philippine law and obey Philippine instructions. That incentive is based on the threat of financial retaliation -- not military force. Picture a scenario where the Philippines unilaterally decides to default on its debts to China in retaliation for violations of the red lines that DFA secratary Cayetano laid out in May of this year. This will adversely impact the Chinese financial institutions that are party to these loans, and would thus create powerful voices of dissent within China about their own actions towards the Philippines. The ripple effects of this action upon other countries who are themselves holders of Chinese debt would intolerably unpredictable for a China. More on this point later in this thesis.

The effectiveness of that incentive is proportional to the risk that China faces if it violates Philippine law and directives. For that reason, calibrated exposure to Chinese debt is actually an investment in the country's overall defense posture.

As outlined earlier, Pakistan and Israel have -- thus far -- all shown examples of how BRI investments can be made to work. Both have found their own respective, unique, approaches for managing risk with reward. The Philippines needs to distill these examples and develop its own equivalent initiatives. By the administration's calculation -- for good or for ill -- it apparently found part of the answer in its build-build-build program.

For the same reason that discussions about defense cannot be viewed in isolation -- it cannot just be about fighters, missiles, frigates, and other weapons -- the "build, build, build" program also cannot be viewed purely as being about infrastructure development or be measured bythe associated loan interest rates alone. It's value can only be properly assessed in terms of how it well it keep China at bay . . . and compliant.

The 3rd option actually needs to be pursued AFTER the 4th option. Only through progress with the 4th option can the Carpio approach even be contemplated . . . if it remains necessary at all.

The Philippines only has so many bridges and infrastructure projects it can build. It cannot afford to build indefinitely. So the measures outlined in steps 1 and 2 can really only go so far. To maintain, if not improve, the ability to strike back at China financially the Philippines actually needs to further broaden its economic engagement. At some point . . . the Philippines has to talk about the West Philippine Sea.

This is where discussions about the future of the 4th option becomes purely theoretical, as Duterte is unlikely to see the endgame of this gambit within his Presidency. Without indications about who the next President will be, and what his or her policies will be vis-a-vis the current template, all that any observer can offer is wild speculation in the form of "usapang barbero".

What is clear, however, is that the future of exploration ventures in the WPS will have to be a collaborative effort among multiple countries . . . to include unwelcome guests such as China. With the settling of territorial claims being unlikely in this generation, the most that could reasonably be expected is some form of a treaty between claimant nations.

Malacanang highlighted this need in March of this year with the following statement.

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.

< Edited >

Duterte can only complete steps 1 and 2 of the 4th option, and lay the ground work for the 3rd step. The Philippine ambassador to China described the ground-work efforts as follows:

PH, China to work out how to tap oil, gas that both sides claim
Published February 14, 2018, 2:42 PM
By Reuters

https://news.mb.com.ph/2018/02/14/ph-china-to-work-out-how-to-tap-oil-gas-that-both-sides-claim/

The Philippines and China have agreed to set up a special panel to work out how they can jointly explore oil and gas in part of the South China Sea that both sides lay claim without having to address the explosive issue of sovereignty.

China claims most of the South China Sea, where $3 billion in sea-borne trade pass every year, and has competing claims in various parts of it with Brunei, Malaysia, Taiwan, Vietnam and the Philippines.

“It’s just the start of a process,” Philippine ambassador to China, Chito Sta. Romana, told reporters late on Tuesday after diplomats from both sides met for the second time under a bilateral mechanism aimed at defusing longstanding maritime tensions.

He said the decision to form a working group on cooperating on energy was a “breakthrough”.

Forming an agreement for a joint project would be extremely complex and sensitive as both countries claim jurisdiction of the site of the oil and gas reserves, so sharing them could be deemed legitimizing the other side’s claim, or even ceding sovereign territory.

The idea of joint development was first hatched in 1986, but disputes and the sovereignty issue have stopped it from materializing.

But time is of the essence for the Philippines, which relies heavily on energy imports to fuel its fast-growing economy. That is complicated by estimates that its only domestic natural gas source, the offshore Malampaya field, will be depleted by 2024.

< Edited >

PRRD okays TWG on PH-China joint exploration
By Joyce Ann L. Rocamora  August 7, 2018, 6:07 pm

http://www.pna.gov.ph/articles/1044041

MANILA-- President Rodrigo Duterte has approved the establishment of a technical working group (TWG) on the Philippines-China joint exploration in the disputed West Philippine Sea, Foreign Affairs Secretary Alan Peter Cayetano said Tuesday.

"I just got his approval in principle, but I can tell you that the areas where I want to have experts at the highest level, meaning we have Cabinet level," he told a press briefing in Taguig City.

For the environment, Cayetano said the TWG will have representatives from the Department of Environment and Natural Resources; for oil and gas, the Department of Energy; for security, the Department of National Defense, National Security Council, National Intelligence Coordinating Agency and the Department of the Interior and Local Government.

There will also be a legal team, composed of the Department of Justice and the Office of the Solicitor General to advise and help in the negotiation stage.

"In our arbitration award, we had a team, there's a legal team. In this case, it's not a legal team that's going to file a case, but a legal team that's going to advise us and help us negotiate," he said.

The legal team will focus on three components -- on oil and gas, on Constitutional law, and on the United Nations Convention on the Law of the Sea.

Cayetano also disclosed that the Chinese side is ready with its own technical working group.

"I'll let them make their own announcements. But as soon as both sides have working groups, at least we can talk. I'm not sure if we can agree but at least we can start talking."

Cayetano said the timeline is still "as soon as possible."

With the creation of working groups on both sides, he said they are hoping to finish the draft framework by September 2018.

"I am even more optimistic that we can come up with something by September. I've always told you it can happen tomorrow, it can happen in a year, but why are we rushing? Because Malampaya will run out in 2024," Cayetano said.

Cayetano maintained that any deal on the joint exploration talks will be in favor of the Philippines, which may be equal to the 60-40 Malampaya sharing or even better.

"Malampaya is structured on 60-40 but we're negotiating for better than that," he said.

Cayetano clarified that same as China, the Philippines also has an "indisputable claim" in the strategic waters.

But opting for a joint exploration talks instead of settling the territorial dispute first does not necessarily mean giving up the country's sovereign rights in the region, he said.

"We also have indisputable sovereignty over our territory which is defined by the Philippine Constitution, and we also have indisputable claims under the UNCLOS. But again, where do we take it from there?"

He said if the country is to wait for a decision on territory, "it might take forever."

"For us to come to some agreement, which is the same with the Code of Conduct in the South China Sea, we have to put aside territorial and sovereign rights claims but not abandon them," Cayetano said. (PNA)

But the decision to complete the step to its logical conclusion, or to pursue a completely different tack, is purely the purview of the Philippine Senate. No President can make unilateral decisions on territorial integrity.