BUSINESS tycoon Manuel Pangilinan is bullish on the resumption of exploration activity under Service Contract 72 (Recto Bank) in the West Philippines Sea as the diplomatic climate between the Philippines and China has become warmer under the Duterte administration.
Forum Energy Plc. holds the license for Service Contract 72, which covers Recto Bank, known internationally as Reed Bank. The company is a subsidiary of Pangilinan-led Philex Petroleum Corp.
Forum Energy was licensed several years ago by the Department of Energy to conduct a drilling survey in a petroleum exploration area, but the territorial dispute with China prompted the government to issue a moratorium on exploration activities starting December 2015.
PXP Energy Corp., then named Philex Petroleum, owns 60.49 percent of Forum Energy, a UK-based upstream oil and gas company. Forum Energy, in turn, holds a 70-percent stake in SC 72, with the remaining share held by Monte Oro Resources and Energy Inc.
“I think to the extent that the government has adopted a more friendly, more conciliatory push to China, I think the atmosphere has become better for a resumption of a discussion with China in general. And we’d like to move in that direction,” Pangilinan said in an interview.
Frosty relations between the Philippines and China started thawing when President Rodrigo Duterte went to China in October last year.
Previous attempts by rival claimants to jointly explore the disputed South China Sea have failed. The Philippine Supreme Court declared as unconstitutional the 2005 Joint Marine Seismic Undertaking (JMSU) between the Philippines, China and Vietnam.
Talks for joint exploration between PXP Energy and China National Offshore Oil Corp. (CNOOC) during the administration of former President Benigno Aquino 3rd failed to produce an agreement on joint exploration in Reed Bank.
“We hope [to start the exploration]. The overall atmosphere created by President Duterte of being more
conciliatory and more investor friendly, I think, will help future discussions or will help resume discussions,” Pangilinan said.
“We are just contractors to the government. Resources belong to the government. After you’ve arrived at a business arrangement, it has to be within the context of what Philippine laws and Chinese laws [allow],” he said.
“We as a Philippine entity cannot violate our laws nor certainly our sovereignty. We can’t do that so we have to stay within [the bounds of]Philippine laws, within Philippine sovereignty,” he added.
For exploration, Pangilinan said the drilling window is usually during the summer months.
“We still need one more seismic survey, partly to complete the totality of the survey. We want to be able to determine the baseline environment conditions on where we’re supposed to drill and we have to establish the stability of the soil underwater if we were to eventually put an oil rig there. So we need a survey for that,” he said.
“The question is if we can do it fast enough, can we do exploratory wells? Under our work program, we need to do two. So can we do [that]this year? Hopefully we can, so we accelerate the program. If not, it’s going to be summer next year,” he added.
The continuation of exploration ultimately depends to the Philippine government.
“It’s up to them to release the moratorium. If they do, then we’ll advise the Chinese that we are going to do this.
This is our work program, approved by our government, just to let you know,” Pangilinan said.
“But you know, we have to determine whether there’s gas there in SC72 because Malampaya will run out. In a way, you have to synchronize the period under which Malampaya will start to run out versus the time to develop,” he said.
The Malampaya gas facility, which is presently the only source of fuel for Philippine natural gas plants, is set to
close when its service contract expires in 2024.
Even if the government decides to extend the life of the Malampaya contract, the gas field is projected to be completely depleted by 2030.
“If indeed the reserves in SC72 are commercial quantity, commercial feasibility, then we have to start work sooner rather than later so that it synchronizes with the time Malampaya starts going down, because if either there’s no gas there or if we’re delayed, then what will happen to the three big gas plants in Batangas? We’ll have to build a gas facility,” Pangilinan said.
“From the perspective of supply of gas, it’s better if we have our own supply of gas. Otherwise we import gas and it’s more expensive. But I think government has taken a cooperative perspective,” he added.