Philippines Set to Seek Oil in South China Sea

MANILA (Dow Jones Newswires), Aug. 2, 2011

The Philippines plans to auction off areas of the South China Sea for oil exploration despite worsening disputes with China over the territory, an official said Tuesday.

Energy Undersecretary Jose Layug said several foreign firms, including China's state-owned CNOOC, had already expressed interest in drilling in waters off the western Philippine island of Palawan.

The areas set for exploration are far from the disputed Spratly islands and well within the Philippines' 200-nautical-mile exclusive economic zone, he said on the sidelines of an energy conference in Manila.

"These are not disputed areas. The area we are offering for bidding is definitely within the territory of the Republic of the Philippines."

However, China is known to claim most of the South China Sea, including areas the Philippines says are clearly Filipino territory.

Aside from CNOOC, two other Chinese firms are among those interested in contracts to drill in the area, Layug said without naming the other two.

The Philippines is to name the winning bidders next year, Layug said.

He expressed confidence the Chinese wouldn't try to harass Philippine-sanctioned oil exploration vessels there.

"These areas are near Palawan which means they (winning bidders) will have to come to the Philippines to do it," he said.

Tensions have risen in recent months, with countries in the region claiming China has been more aggressive in enforcing its claims on parts of the South China Sea.

China, the Philippines, Vietnam, Malaysia, Brunei and Taiwan have overlapping claims to all or parts of the sea, which is believed to be rich in oil and gas deposits.

Last February, two Chinese vessels allegedly harassed a Filipino-commissioned exploration vessel off Reed Bank, an islet north of the Spratlys.

The Philippines has also accused Chinese forces of shooting at Filipino fishermen and placing markers on some of the islets.

The Reed Bank, which Manila calls "Recto Bank" and is also claimed by China, is 273 kilometers from Palawan.

Philippine officials said Manila had previously authorized drilling in that area without any Chinese opposition.

Copyright (c) 2011 Dow Jones & Company, Inc.

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