China ready to resume energy exploration talks with Marcos gov't; DOE to deal with existing contractors

China said it stands ready to continue negotiations on joint oil and gas projects in the South China Sea with the incoming Philippine administration after President Rodrigo Duterte's outgoing government said it has terminated the talks.

During the founding anniversary of the Department of Foreign Affairs on Thursday, outgoing Foreign Secretary Teodoro Locsin said Duterte ordered the termination of the Philippines' joint oil exploration discussions with China.

“The President has spoken. I carried out his instructions to the letter. Oil and gas discussions are terminated completely. Nothing is spending. Everything is over,” Locsin said, adding constitutional constraints have hampered the talks.

In a press conference in Beijing on June 24, Foreign Ministry Spokesperson Wang Wenbin cited a memorandum of understanding which the two governments signed on November 2018 to embark on negotiations "and made important progress within this framework."

China's citing of the MOU signed by the two governments seems to imply that from Beijing's perspective the oil and gas negotiations between the two governments would continue despite the changing of Philippine leadership unless the bilateral agreement is revoked.

Incoming President Ferdinand Marcos Jr. has not stated whether he would continue the negotiations.

China "will strive to take early substantive steps so as to deliver tangible benefits to both countries and peoples," Wang said.

"Joint offshore oil and gas development is the right way for China and the Philippines to manage maritime differences and achieve win-win results without prejudicing either side’s maritime positions and claims," he added.

But since the signing of the MOU in 2018, Philippine and Chinese negotiators have failed to resolve the issue of which country has sovereignty over the Recto Bank, internationally known as Reed Bank, where a joint exploration and development has been proposed.

Neither side wanted to relinquish sovereignty rights over the contested area, hampering years of negotiations between Duterte's administration and the Chinese government, diplomatic sources have said.

Recto Bank, which is within the country's exclusive economic zone as declared by an international tribunal in The Hague, Netherlands, is vital to Philippine national interest as it is the only replacement for Malampaya, which supplies 40 percent of the energy requirement of Luzon.

The Philippines wanted the proposed joint exploration and development to be framed as a service contract under its Department of Energy (DOE) with Manila having the sovereign rights over the Recto Bank and China essentially as a foreign investor, diplomats have told GMA News Online.

China, which claims virtually the entire South China Sea, rejected that Philippine position, resulting in a long impasse in the negotiations.

DOE: Ongoing talks with service contract holders

The DOE on Saturday said it is continuing talks with existing service contract holders for exploration activities.

"The DOE firmly stands for the assertion of Philippine sovereign rights through the promotion of exploration in the WPS [West Philippine Sea]. Following the SJPCC’s [Security, Justice, and Peace Cabinet Cluster] suspension order and now with the termination of negotiations with China, the DOE, in coordination with the SJPCC for safety and security concerns, continues to pursue talks with existing service contract holders so they can proceed with their work programs," it said in a statement.

It added that the Inter-Governmental Joint Steering Committee (IGJSC), which serves as the official negotiating forum between China and the Philippines, only met once in October 2019.

"The IGJSC convened only once on 28 October 2019 and no agreement was reached during said meeting," said the DOE, which has been designated as co-vice chair of the IGJSC.

"Despite this, the DOE doggedly promoted exploration in the West Philippine Sea (WPS) through the Philippine Conventional Energy Contracting Program, where it opened areas for application and nomination, reviewed bids, and issued licenses," it added.

"Furthermore, the Department lifted the moratorium on all gas exploration activities in the WPS in October 2020. For the DOE, this decision was an exercise in foresight given the current global energy crisis," the Energy department said.

"This encouraged our Service Contract (SC) holders to restart investments in WPS exploration. Specifically, SC No. 72 and SC. No. 75 contracted survey vessels to carry out exploration activities in Recto Bank," it added. —KG, GMA News