Time has Come for Philippines and China to jointly drill for oil in Philippines-China sea as a permanent, logical solution to crises in area

Published July 15, 2019, 12:55 AM

by Charissa Luci-Atienza & Bernie Cahiles-Magkilat



Former Speaker of the House

Jose C. De Venecia Jr.
Jose C. De Venecia Jr.

Perhaps the time has now come for the Philippines and China, to undertake joint oil exploration in the West Philippine Sea (South China Sea) through their oil exploration companies, which could most likely result in significant commercial crude oil and/or natural gas discoveries in the Reed Bank or other areas of the Spratlys, closer to Palawan, where a hydro-carbon strike should likely yield 60-40 oil/gas sharing with China in favor of the Philippines.

It is a logical solution to the continuing crisis in the contested areas of the Sea.

If the drilling is much further in the sea in Chinese or Vietnamese territory, the corresponding larger share will go either to China or Vietnam, with additional share fees for whoever is designated “operator” for the consortium, normally a much-experienced oil-exploration company, which could also be a Western company, American or British.

The actual exploration or oil/gas drilling of say a starting modest 5-wells program in the area could be undertaken by the state-owned Philippine National Oil Company (PNOC) with a Chinese state-owned company in a formal joint-venture with appropriate sharing of the exploration cost and/or development cost. The state-to-state joint venture could be later joined by the private oil companies. Both parties could designate one of them as Operator of the project, most likely the Chinese because of their extensive longer experience in offshore oil/gas drilling. Or both could designate a “Western company” as Operator of the Consortium.

In the event of a hydro-carbon strike in the drilling of an exploratory well that will yield crude oil or natural gas, it could lead to an enthusiastic, immediate large-scale drilling of a number of exploration and/or confirmation and development oil/gas wells by the Filipino-Chinese consortium.

It is also possible that the drilling will not provide any oil/gas results or yield only trickles of non-commercial hydrocarbons and result in much-gnashing of teeth and failure, and suspension of the program until a new richer exploration area could be identified nearby or much farther away. The West Philippine Sea/South China Sea is a vast area.

We had been to the choppy North Sea with its high waves, invited by a Norwegian-British petroleum consortium in the 1970s in our capacity then as President of the Philippine Petroleum Association and Chairman of Basic Petroleum and the now defunct Landoil Resources Corporation with our elder brother Oscar de Venecia, President of Basic Petroleum, and nephew Ramon San Jose III. Our son Joey III and daughter Vivian, both under 10 years, we left behind in Stavanger, Norway, where we took off by helicopter for the less than an hour journey to the North Sea drilling area between Norway and Great Britain. (It is said that in the event of a helicopter crash one cannot last long more than a few minutes in the turbulent sea which is icy-cold).

The successful petroleum drilling in the North Sea, a Norwegian-British consortium project, perhaps we barely recall including a U.S. company (the Americans have much offshore drilling experience in the Gulf of Mexico) we believe continues up to this day. At the time, the hydrocarbons lifted from the North Sea were shared with Norway, the British share of production piped directly to Teeside, England, and large quantities earmarked for refineries in Bremen, Germany.

At age 82, we recall these experiences because the Philippines might have to duplicate the multi-country North Sea agreements and experiences with perhaps variations, with the Chinese and/or the Vietnamese in the likely event of a development by a 2-nation or 3-nation drilling consortia in the West Philippine Sea/South China Sea.

If we consider exploratory offshore drilling further and farther towards China or Vietnam in the Tonkin Gulf, where Philippine companies could also be participants, or farther south-westward including Indonesia, Malaysia, and Brunei, these are probabilities that we should now envision and anticipate. An understanding with China must be reached to deal with Taiwan’s role in the exploration/development program in the Taiwan-held offshore isles nearby.

Indonesia, Malaysia, and Brunei have much, much extensive experience and are long-time petroleum producers in their historically oil-rich areas than the Philippines in offshore and onshore oil exploration and they also share the South China Sea.

We must say that in the event of a commercial oil discovery in the immediate area, the refining will be done in Philippine or Chinese or Vietnamese refineries located relatively nearby through eventual interconnectivity pipelines or via large oil tankers parked nearby.

We wrote before that engaging American drillships from the Gulf of Mexico will be too expensive to hire or engage and bring them all the way to the South China Sea for drilling in the offshore areas near Palawan and further off Fujian or in the Tonkin Gulf area of Vietnam.

We wrote then: “I believe if we start talking quietly and professionally instead of shouting at each other in the wire news services, television or radio, our negotiations, aided by our professional petroleum executives and geologists, could agree on a Philippine-Chinese-Vietnamese initial five-wells exploration program with reasonable, budget costs for an 18-month or two-year period including adequate time for data analysis. This will immediately mean two years of uninterrupted peace in the South China Sea.

“So that nobody will be more equal than the others irrespective of size, might, and contribution, the cost of exploration and development must be shared and divided equally among the three-nation partners. And the three countries must agree among themselves who will be the designated “operator” who will assume leadership and management responsibility for the drilling program under a Drilling Committee composed of the 3-nation partners who might engage other offshore international technicians for independent consultations.

“The sharing system unless one partner abdicates for any valid reason whatsoever must continue to preserve the continuing efficacy of the partnership and of the system itself which could run for as long as a hundred years or more.”

When we were Speaker of the House of Representatives (1992-1998; 2001-2008), we had the priviledge to discuss with then Chinese President Hu Jin Tao and President Gloria Macapagal Arroyo in Beijing our plan for an initial Philippines-China Joint Oil Seismic Program in the South China Sea which both welcomed immediately (one of the highlights of the Arroyo state visit) and urged us to proceed soonest to invite the Vietnamese to join the Program, and which we did immediately, and with the help of our counterpart Speaker of the Vietnamese Parliament in Hanoi, and the then, Vietnamese Deputy Foreign Minister, a graduate from La Salle Manila.

Thus, the Tripartite Seismic Agreement in the South China Sea, which we earnestly hope will now lead to joint petroleum drilling in the sea.

The Philippines, Vietnam, and China purchase huge amounts of oil from the Persian Gulf (Saudi Arabia, Iran, United Arab Emirates, and Kuwait), hauling oil from great distances, when God has given all of us, presumably enough hydrocarbons from our own frontyard or backyard.

Today we must encourage and support President Rodrigo Duterte, Foreign Secretary Teddy Locsin and the opposition party led by Vice-President Leni Robredo to endorse a joint Philippines-China hydrocarbons drilling program, to be joined now or soonest by Vietnam as a major solution to our (Philippines) almost 100% dependence on purchase of petroleum from the Middle East and to convert the South China Sea area from a zone of tension and conflict into a Zone of Peace and Development for all our peoples and, God-willing, the petroleum could last for a hundred years and beyond.

(You might wish to check with our earlier column “A formula for the Philippines, China and Vietnam and the West Philippine Sea-South China Sea and other participants” on April 21, 2019)