Philippines say drilling for oil in disputed South China Sea may resume in 2017

The Philippines suspended exploration at the Reed Bank, which it calls Recto Bank, in late 2014, as it pursued international arbitration over territorial disputes.

South China Sea
South China Sea Reuters

A Philippine energy official said on Wednesday that drilling for oil and natural gas on the Reed Bank in the South China Sea may resume before the end of the year. This comes as the government prepares to offer new blocks to investors in bidding in December.

In late 2014, the Philippines suspended exploration at the Reed Bank, which it calls Recto Bank, as it pursued international arbitration over territorial disputes. The bank is in waters claimed by China.

Ismael Ocampo, director at the Department of Energy's Resource Development Bureau, told Reuters that the agency expected the suspension to be lifted in December. According to him, a directive from the Department of Foreign Affairs directing the Department of Energy to resume oil and gas exploration in the South China Sea was already in the works.

China claims a vast portion of the disputed South China Sea; where about $5 trillion worth of sea-borne goods pass every year. Apart from Beijing, Brunei, Malaysia, the Philippines, Vietnam and Taiwan also have claims.

Last year in July, the Permanent Court of Arbitration in The Hague invalidated China's massive claim to sovereignty over most of the South China Sea. The tribunal ruling clarified Philippine sovereign rights in its 200-mile Exclusive Economic Zone to access offshore oil and gas fields, including the Reed Bank, 85 nautical miles off its coast.

"We will try to conduct seismic activities," in the disputed waters, Ocampo told Reuters. He is hopeful that China would not complain and harass crews of survey ships to be deployed.

In 2011, Chinese patrol vessels almost rammed a survey ship at the Reed Bank contracted by a PXP Energy Corp (PXP.PS) unit.

President Rodrigo Duterte, who took power shortly before the Hague ruled in favor of Manila, has said that he would raise the landmark ruling with China eventually, but he first needed to strengthen relations between the two countries.

Duterte, who has been cool toward old ally the United States, hopes closer ties with China will yield billions of dollars in loans and investment in infrastructure, the backbone of his economic agenda.

PXP Energy Chairman Manuel Pangilinan said in March he was optimistic his company's exploration project at Reed Bank would soon resume, citing the warming ties with China.

The Philippines is under pressure to develop indigenous energy resources as it relies overwhelmingly on imports to fuel its fast-growing economy. Its main source of natural gas, the Malampaya field near the disputed waters, is due to run out in less a decade. PXP's Reed Bank prospect has indicated natural gas yield potential.

Ocampo said that more than two dozen oil, gas and coal blocks, including additional areas in disputed waters, may be offered during the December bidding.