WEAK OIL PRICES during the pandemic serve as a disincentive to joint exploration with China in the West Philippine Sea, a maritime law expert from the University of the Philippines said.
Jay L. Batongbacal, head of the University of the Philippines Institute for Maritime Affairs and Law of the Sea, said in a virtual forum Monday that although global oil demand is starting to pick up, prices remain low, undercutting the case for exploration.
“With lower oil prices, (the) incentive to explore is not as high or not as urgent at this point,” he said.
“It’s a kind of a disincentive for us to really push hard and fast on joint exploration because ‘di ganoon ka-urgent ‘yung need (the need is not really urgent) and the market is not favorable right now,” he said.
Exploration typically needs to be supported by buoyant prices to offset the added expense and risk of prospecting. The oil industry works on the basis of tapping fields that cost least to produce from, which can be profitable even when prices are low. Such fields return high margins when prices are high. Marginal areas that are in deep waters, are hard to reach, or are subject to territorial disputes become more attractive as high prices make them profitable.
Representatives from China and the Philippines have yet to meet to discuss exploring the disputed sea, according to Energy Undersecretary Felix William B. Fuentebella, speaking at the same briefing.
“The legal groups between China and Philippine will still meet to discuss the details (of the joint exploration); that’s the latest for now,” he said.
Prof. Batongbacal claimed that foregoing the opportunities in exploring the WPS won’t have “as big of an impact on our energy needs for now” as the need for it is not yet high.
The suspension of discussions has given the Philippines more time to study and to come up with a legislative framework required for exploration and development of the contested waters, the lawyer said.
“‘Yung rules kasi natin naka-set up na (Our rules are set up in a way that the) government is contracting to the private sector, at ‘yung government-to-government, na may isyu pa ng pakikipag-agawan ng teritoryo, ay hindi covered (and they do not cover government-to-government deals where territory is disputed),” Mr. Fuentebella said.
“As it is right now, we have to update the exploration laws,” he said, referring mainly to Presidential Decree No. 78 or the Oil Exploration and Development Act of 1972.
China is not receptive to deals structured as partnerships between a government and a foreign private firm, in which the company is subject to the laws of the government.
The Department of Energy’s Philippine Conventional Energy Contracting Program seeks investments from both local and foreign entities who can either choose to bid among the 14 predetermined areas for exploration offered by the country or to nominate other areas.
The department has received offers from undisclosed investors to survey three oil prospects in the WPS under this program.
According to Mr. Batongbacal, there must be a framework that recognizes the equal legislative powers of two states entering into a joint agreement, which does not bind them to each other’s laws.
Another crucial issue in the ongoing deal is the perception of surrendering the country’s sovereign rights to its territory.
“The legislation has to make it very clear na (that) any action or agreement into, like this, wala talaga siyang prejudice sa ating position (it’s without prejudice to our position),” he said.
He also proposed a treaty governing state-to-state partnerships. “It’s basically another treaty with its own special legislation to implement that treaty,” he said. — Adam J. Ang