MVP in talks for tie-up with China oil firm

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12:12 AM May 9th, 2012

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May 9th, 2012 12:12 AM

Businessman Manuel V. Pangilinan has revealed discussions with one of China’s biggest oil firms for the possibility of a partnership with Beijing to tap what the likely vast oil reserves at the disputed Recto Bank.

Speaking to reporters on Tuesday, Pangilinan revealed that he met with officials of China National Offshore Oil Co. (CNOOC) to discuss the resources in the area otherwise known as Service Contract 72.

“I was in Beijing last week. I met with CNOOC officials but that’s as far as I can go at this stage,” Pangilinan said. “[SC 72] was the primary focus of discussions.”

Pangilinan represents the investments of Hong Kong-listed First Pacific Co. Ltd. in the Philippines. First Pacific owns a majority stake in Philex Mining Corp., which, through subsidiaries, owns 64.45 percent of Forum Energy Plc., the company that holds a 70-percent stake in the SC 72 license.

“I hope that you appreciate that the matter of the Recto Bank, Spratlys, Scarborough Shoal and other disputed areas, these are critical to our country. It seems critical to China as well,” Pangilinan said as he declined to reveal further details of discussions in Beijing.

However, an ally of President Benigno Aquino III in the Lower House expressed wariness about the plan for the Filipino oil exploration firm to hook up with the Chinese petroleum giant to exploit the country’s oil and gas reserves found near the disputed Spratlys.

Muntinlupa Representative Rodolfo Biazon is questioning the “propriety” of striking a partnership with the state-owned CNOOC while China has been bullying the Philippines in the past few weeks over the country’s claim on Panatag Shoal off the coast of Zambales province.

Sleeping with enemy

“Why are we allowing the Chinese to explore any part of our territory when they are treating us like pushovers in our boundaries? It’s like going to bed with the enemy,” said Biazon in a phone interview.

Biazon—a former senator and a former Armed Forces of the Philippines chief of staff—is puzzled why a Filipino company would even consider engaging in a partnership with a Chinese firm amid the tension with China when there were dozens of oil and exploration firms from other countries that do not have a conflict with the Philippines over territorial claims.

“We should not allow any of the claimants to explore any part of our territory which they are claiming from us because it would only embolden them to grab these resources from us,” said Biazon. “We are almost admitting that they have supporting claims over our territory.”

Bigger than Malampaya

Last April, Forum Energy confirmed that gas resources at SC 72 were likely larger than initially thought. The new data came from the interpretation of new 3D and 2D data acquired in the service contract area.

The area is now believed to have roughly 3.4 trillion cubic feet of gas and potentially 440 million barrels of oil—said to be bigger than the existing Malampaya gas field off Palawan.

Currently, the Malampaya gas field is expected to provide gas for three power facilities in Batangas until 2024. The facilities collectively generate 40 percent of Luzon’s electricity requirements.

Pangilinan said Forum Energy would push through with its planned drilling at Recto Bank despite the area also being claimed by Taiwan and China. “We have a work program commitment to the government and we intend to implement the schedule as approved by the government,” he said, without providing details of the said timeline.

“But if certain supervening events happen, we are business people. We do not have gunboats,” he said, warning that any escalation of tensions with China would likely disrupt exploration activities at Recto Bank. “Any commercial arrangement will be colored with sovereignty issues.”

Pangilinan said Forum Energy would need to have a foreign partner to tap the potential resources at SC 72.

“Eventually, if it’s China or not, it is necessary for us to partner with a [major international oil company] and our government knows that,” he said, noting that no local company has the financial strength or technical capability to tap Recto Bank’s resources on its own.

Another lawmaker with a military background, Parañaque City Representative Roilo Golez, does not see anything wrong, however, with taking in Chinese partners for the Recto Bank exploration.

“If it is a joint venture with a company, like CNOOC, not government to government, with approval of the Philippine government and none from the China government, that’s okay. It’s no different from joint venture with [British Petroleum] in Malampaya,” said Golez in a text message.

Golez, however, was more alarmed by statements made by China Vice Foreign Minister Fu Ying who warned of an escalation of tension in the Panatag standoff.

Golez said that Fu Ying was China’s Ambassador to the Philippines when China formalized its land grab of Mischief Reef in 1999-2000 with their construction of permanent concrete structures on the reef. “During that time, she led a high-powered PR campaign to justify their land grab,” said Golez.

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