Is China after the Philippines'oil and gas fields?

Is China after the Philippines’ oil & gas fields?

Filipinos groaning from high power bills might have good reason to be concerned about China’s claims in the West Philippine Sea (South China Sea).

Philippine government officials have expressed apprehension that China may be after the oil and gas-rich areas there, including the Sampaguita gas field recently discovered by an oil exploration firm under contract with the Philippine government.

Philippine officials are concerned because the country’s energy future is at stake.

Department of Energy Undersecretary Jose Layug Jr said in a recent media briefing, which I attended, that “the Malampaya (gas) reservoirs are good until 2024″ or only for the next 12 years.

Malampaya gas now provides 40% of the power requirements of Luzon where most of the country’s economic activities are located.

The gas is currently being piped to three power plants in Batangas which produce a combined 2,700 megawatts.




Philippines’ biggest gas find

Shortly after the DOE’s media briefing last month, a major gas find bigger than Malampaya was announced by Forum Energy Plc in the Sampaguita gas field located in Recto Bank, internationally known as the Reed Bank.

This discovery might not have taken place if the Philippine military, on orders of its Commander-in-Chief President Benigno Aquino, had not secured Forum’s survey ship which Chinese vessels had threatened to ram this March 11, 2012.

The harassment of Forum’s survey ship actually started over a year ago when two Chinese patrol boats visibly stalked the survey ship on March 2, 2011. This prompted the Philippines to lodge a diplomatic protest with China then.
At that time, the president’s spokesman Edwin Lacierda told a news briefing:

The administration has always asserted that it will dismiss out of hand any claim to what are considered integral parts of Philippine territory, such as the Recto Bank (Reed Bank) in western Palawan.

Recto Bank is some 80 nautical miles northwest of Palawan or well within the Philippines’ maritime exclusive economic zone (EEZ) under UNCLOS (United Nations Convention on the Law of the Sea).
Lacierda also said:
Concerning our defense posture, the administration is determined to improve the capabilities of our military and Coast Guard to enable the effective patrol and protection of our national territory and exclusive economic zone.

President Aquino, during his State of the Nation address in July last year (SONA), also emphasized Philippine sovereignty over Recto Bank when he said:
     Malinaw ang pahiwatig natin ngayon sa buong mundo: Ang sa Pilipinas ay sa Pilipinas; kapag tumapak ka sa Recto Bank, para ka na ring tumapak sa Recto Avenue.
[Our statement to the entire world is very clear: What is the Philippines' is the Philippines; when you set foot on Recto Bank , it is as if you have set foot on Recto Avenue (a street in the Philippine capital of Manila) ]

     On September 1 last year, following his SONA, President Aquino flew to Beijing to meet personally with President Hu Jintao. Both then issued a joint statement that, among others, said:
     The two sides will discuss the establishment of a nautical highway that will infuse new energy to bilateral trade and economic activities between the two countries which complement and support the connectivity between ASEAN and China.

     Both leaders exchanged views on the maritime disputes and agreed not to let the maritime disputes affect the broader picture of friendship and cooperation between the two countries. The two leaders reiterated their commitment to addressing the disputes through peaceful dialogue, to maintain continued regional peace, security, stability and an environment conducive to economic progress. Both leaders reaffirmed their commitments to respect and abide by the Declaration on the Conduct of Parties in the South China Sea signed by China and the ASEAN member countries in 2002.
     But a week after Aquino’s five-day visit to China, Budget Secretary Florencio Abad – one of the cabinet ministers closest to the president – said the country would be beefing up its defense over its gas fields.
     Abad announced that the Philippines would spend P4.95 billion for buying helicopters and setting up radar stations in order to strengthen the country’s defense of its oil and gas assets near Palawan. Royalties from the Malampaya gas field would be used for this purpose.

Quietly, the Philippine military also told Philex Petroluem – Forum’s parent firm – to carry on with its survey of the Sampaguita gas field off Palawan. And it promised to secure the ship.

As a result, the survey recently confirmed and for the first time that the Sampaguita gas field – which had been an area of exploration since 1970 or 42 years ago – was indeed commercially viable. Its total reserves were estimated to be as high as 16.6 trillion cubic feet (TCF) of gas and 416 million barrels of oil. It was even bigger than the Malampaya gas field.

The Sampaguita gas field discovery – 90 nautical miles northwest of Palawan – is nowhere near Scarborough Shoal (which is northwest of Zambales in the island of Luzon) where the tense standoff between armed Philippine and Chinese vessels is now taking place.

Earlier, I wrote about the competing claims of the Philippines and China on Scarborough Shoal. See – Why get so riled up over some rocks under the sea?

This piece will be about the competing claims, especially in the Spratlys or what China calls the Nansha Islands. A lot of articles have been written about how many islands each country is claiming.

First, please take a look at the map below which shows the various countries’ claims in the area. China has enclosed all its claims in a “nine-dashed line” – which is shown here as a red line.

The next map, posted by the US Energy Information Administration but which it obtained from the US Central Intelligence Agency, shows the oil wells that each country has in actual operation. Notice that most of these oil wells are actually within China’s nine-dashed line.

Notice that Malaysia and Brunei have many oil wells in actual operation.

In contrast, notice that the Philippines has only ONE oil well in actual operation, plus ONE “new field discovery.”

Please note, too, that the Philippines’ ONE oil well in actual operation – the Malampaya gas field – is right on China’s claimed nine-dashed line.

The Philippines’ maritime area northwest of Palawan is believed to be rich in untapped oil and gas deposits.

However, while the Philippines has been offering for tender the oil exploration blocs in northwest Palawan for decades, it was only in recent years that China became quite adamant about its ownership rights of the area covering these exploration blocs.

In the mid-1990s, the quarrel between China and the Philippines centered more on fishing rights rather than on oil exploration blocs. (NOTE: At the end of this piece, I have added a list of the various military encounters between China and other claimant states. This list shows that the Philippine military has engaged China, Vietnam and Malaysia through the years.)
One senior Philippine government official traced China’s interest in Recto Bank to the joint survey that China and the the Philippines signed in September 2004. The official, who spoke to me on condition of anonymity, said:

The truth is, there’s nothing in the Spratlys (or Nansha islands) but coral and endangered beautiful fish. There are no oil resources there.

The resources are in Recto Bank which China started claiming only after the previous administration (of President Gloria Macapagal-Arroyo) entered into a Joint Marine Seismic Undertaking (JMSU) with China in 2004.

Forum’s recent gas find is on Recto Bank, which is also near the Camago-Malampaya fields now in operation. The US Energy Information Administration (US EIA) noted that:

The Filipino Malampaya and Camago fields are in waters claimed by China. Both fields are estimated to contain a combined amount of 2.3 to 4.4 trillion cubic feet of natural gas reserves. The Philippines has proceeded with development of the fields and linked the gas output to three power plants via a 312-mile pipeline. There have been no objections from China regarding this development. The Malampaya came on stream in October 2001.

Indonesia also came under protest by China after the former found gas-rich fields off Natuna Islands, the US EIA noted:

     Indonesia’s claim was undisputed until China released an official map with unclear maritime boundaries indicating that Chinese-claimed waters in the South China Sea may extend into the waters around the Natuna Islands.
But the US EIA added:
     Indonesia responded in 1996 by holding large military exercises in the Natuna Islands region. Since then, Indonesia has begun major natural gas production in the Natuna area without China voicing any objection. Indonesia has been exporting Natuna gas to Singapore’s Jurong island via a 400-mile undersea pipeline since 2001.

As of 2008, the Natuna fields are estimated to have close to 46 trillion cubic feet of recoverable reserves – dwarfing Forum’s Sampaguita gas field.

As for Malaysia, the US EIA also noted:

     Many Malaysian natural gas fields located offshore Sarawak are also claimed by China, but to date, China has not specifically objected to their development. Discoveries of oil in 2002 and 2004 (by Murphy Oil and Shell Malaysia, respectively) off the coast of Sabah have contributed to the dispute between Malaysia and Brunei over offshore rights. Brunei had asserted a 200-mile exclusive economic zone (EEZ) off its coastline in 2000. Negotiations between the two governments to resolve the issue are ongoing.

China’s objections with Manila intensified last year

     In July 11 last year, the Philippines offered for bidding oil exploration Blocs 3 and 4, northwest of Palawan. China vigorously registered its objections over this.

The two blocs are part of the area where President Gloria Macapagal-Arroyo allowed China and Vietnam to undertake a seismic survey in 2004, DOE Undersecretary Layug confirmed to me in a recent interview.



Next month is the deadline for the submission of the bids.



The JMSU was signed on September 1, 2004 by China National Offshore Oil Corporation and Philippine National Oil Company.



Barry Wain of the Far Eastern Economic Review called the JMSU “Manila’s bungle in the South China Sea.”



Thanks to the JMSU, Wain said:



The Philippines also has made breathtaking concessions in agreeing to the area for study, including parts of its own continental shelf not even claimed by China and Vietnam. Through its actions, Manila has given a certain legitimacy to China’s legally spurious “historic claim” to most of the South China Sea.



Why did the Philippines do this? I’ll be writing about this later on in another article.



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Military Clashes and Incidents in the South China Sea between 1970 and 2002

[NOTE: I have highlighted in red those which involved the Philippine military.]



1974 – Between China & Vietnam – China seized the Paracels from Vietnam, with 18 of its troops killed in clashes on one of the islands.



1988 – Between China & Vietnam – Chinese and Vietnamese navies clashed at Johnson Reef in the Spratlys. Several Vietnamese boats were sunk and over 70 sailors killed.



1992 – Between Vietnam & China – Vietnam accused China of landing troops on Da Luc Reef. China seized almost 20 Vietnamese cargo ships transporting goods from Hong Kong from June – September.



1994 – Between China & Vietnam – China and Vietnam had naval confrontations within Vietnam’s internationally recognized territorial waters over Vietnam’s Tu Chinh oil exploration blocks 133, 134, and 135. Chinese claim the area as part of their Wan’ Bei-21 (WAB-21) block.



1995 – Between China & the Philippines – China occupied Philippine-claimed Mischief Reef. Philippine military evicted the Chinese in March and destroyed Chinese markers.



1995 – Between Taiwan & Vietnam – Taiwanese artillery fired on a Vietnamese supply ship.



1996 – Between China and the Philippines – In January, Chinese vessels engaged in a 90-minute gun battle with a Philippine navy gunboat near the island of Capone, off the west coast of Luzon, north of Manila.



1997 – Between the Philippines & China – The Philippine navy ordered a Chinese speedboat and two fishing boats to leave Scarborough Shoal in April; the Philippine navy later removed Chinese markers and raised its flag. China sent three warships to survey the Philippine-occupied islands of Panata and Kota.



1998 – Between Vietnam & the Philippines – In January, Vietnamese soldiers fired on a Philippine fishing boat near Tennent (Pigeon) Reef.



1999 – Between the Philippines & China – In May, a Chinese fishing boat was sunk in a collision with Philippine warship. In July, another Chinese fishing boat was sunk in a collision with a Philippine warship.



1999 – Between China & the Philippines – In May, Chinese warships were accused of harassing a Philippine navy vessel after it ran aground near the Spratlys.



1999 – Between Vietnam and the Philippines – In October, Vietnamese troops fired upon a Philippine air force plane on reconnaissance in the Spratlys.



1999 – Between Malaysia & the Philippines – In October, Philippine defense sources reported that 2 Malaysian fighter planes and 2 Philippine air force surveillance planes nearly engaged over a Malaysian-occupied reef in the Spratlys. The Malaysian Defense Ministry stated that it was not a stand-off.



2000 – Between the Philippines & China – In May, Philippine troops opened fire on Chinese fishermen, killing one and arresting seven.



2001 – Between the Philippines & China – During first three months, the Filipino navy boarded 14 Chinese flagged boats, confiscated their catches, and ejected vessels out of contested portions of the Spratlys.



2001 – Between the Philippines & China – In March, the Philippines sent a gunboat to Scarborough Shoal to, “to ward off any attempt by China to erect structures on the rock”.



2002 – Between Vietnam & the Philippines – In August, Vietnamese troops fired warning shots at Filipino military reconnaissance planes circling over the Spratlys.



SOURCE: United States Energy Information Administration