Philippines Okays Drilling in South China Sea

(Bloomberg) --The Philippines said oil exploration in the disputed South China Sea can proceed without China, in what could be a further sign of the Southeast Asian nation’s tougher stance against Beijing.

Philippine Energy Secretary Alfonso Cusi said PXP Energy Corp. can survey Reed Bank in the disputed sea even without partnering with China National Offshore Oil Corp.. A unit of the Philippine oil exploration company, which is in talks with CNOOC, holds the right to drill for oil and gas in the area under Service Contract 72, one of the five such contracts allowed to resume exploration.

“If they can do it by themselves, go ahead,” Cusi said at a virtual briefing Wednesday, when asked if PXP should seek China’s permission to proceed with a survey. “If they can’t do it and they need a partner, they have to partner with China.”

President Rodrigo Duterte last month lifted a six-year ban on South China Sea oil exploration, which his spokesman described as an assertion of the Philippines’ rights in disputed waters. The Philippine leader has recently toughened his stance against China and leaned back toward the U.S., which has also been stepping up its criticism of Beijing’s actions in the disputed waters.

PXP Chairman Manuel Pangilinan on Wednesday said it has submitted a preliminary work program to the Department of Energy. The Reed Bank may need another survey, Pangilinan said last week, adding he is “not aware” if exploration can proceed without China’s permission.

China will likely block new exploration in contested waters, as shown in recent disputes with Vietnam and Malaysia, according to Gregory Poling, director of the Asia Maritime Transparency Initiative in Washington.

Meanwhile, the Philippines is also opening up to other energy sources like gas, geothermal and hydro-power by banning new coal-fired power plants, Cusi said at the same briefing. It’s also crafting a national policy on nuclear power, he said.

--With assistance from Ian Sayson.

© 2020 Bloomberg L.P.