Pangilinan brings in Chinese to disputed Recto Bank oil exploration group
HONG KONG—Businessman Manuel V. Pangilinan plans to expand the consortium undertaking gas exploration at Recto Bank, which both the Philippines and China claim, to “internationalize” and “depoliticize” the concession area while boosting the financial and technological muscle for the project.
While Philippine-based Philex Petroleum Corp. is preparing to work with state-owned China National Offshore Oil Corp. (CNOOC) on the project, under an agreement that requires the approval of both the Philippine and the Chinese governments, Pangilinan, speaking on Thursday night at the Earth’s Resources Conference organized here by Standard Chartered Bank, said that the project may be big enough to take in one or two more foreign partners.
The territorial dispute between China and the Philippines in the West Philippine Sea (South China Sea) will not deter Philex Petroleum’s exploration in the service contract 72 (SC72), Pangilinan said.
He said that as First Pacific Co. Ltd., the controlling stockholder in Philex Petroleum’s parent company Philex Mining, had been based in Hong Kong for quite some time, the group was comfortably working with the Chinese.
Pangilinan traveled to Beijing recently for a meeting with Chinese officials and CNOOC executives.
Dev’t in disputed areas
“The Chinese made it very clear to us that if we [could] set aside the sovereignty issue, they [would] be prepared to deal with commercial interests,” Pangilinan said.
“We could come up with a template for development in disputed areas,” he added.
But Pangilinan said his group had made it clear to both the Philippine government and the Chinese government that it was neither qualified nor authorized to talk about sovereignty issues.
“We’re here as businessmen,” he said.
Widening the consortium beyond Philex Petroleum and CNOOC, Pangilinan said, is necessary because of the large cost and technical capability involved in gas exploration.
Need for foreign partner
“We really need someone with experience and technology—someone who has done it before like CNOOC, Shell or Exxon Mobil,” Pangilinan said.
“We really need a foreign partner to develop the gas field so I guess the most logical is a Chinese company,” he said.
There are three prospective partners from China, but Pangilinan said it was Beijing that would “designate” the “future bride”—and that’s how his group got hooked up to CNOOC.
“I think we’d like to enlarge the consortium beyond the Philippine company—ourselves (at) Philex Petroleum, CNOOC,” Pangilinan said.
“If the size of the field is big enough, I think it’s capable of admitting one or two more international partners,” he said.
“The other advantage of that is that it internationalizes, de-politicizes the project,” he said.
“If it’s just the Philippines and China, it looks like it’s not only a commercial but a political one, so it’s best if there’s one or two more non-Chinese, non-Filipino [partners] involved,” he said.
Asked about how soon CNOOC and Philex Petroleum could come up with clearer agreement, Pangilinan said both parties desired to move forward.
He said the Chinese were asking for basic information that could serve as the basis for an agreement. He told them, he said, that he would clear the information with the Philippine government.
Better than zero
“The discussions are quite discreet, confidential and delicate, but the ball is in our court,” Pangilinan said.
“They said at the moment neither your country or my country benefits from the potential gas field and anything higher than zero is better than zero.”
Asked about the prospective time frame, Pangilinan said that based on personal experience, he can’t use a calendar when working with governments.
“I hope we can move as quickly as we could, find out [the resources], because if there’s no gas there, what are we talking about?”
Philex Petroleum owns 64.45 percent of Forum Energy Plc, which has a 70-percent interest in SC72.
Forum Energy is traded and listed on the London Stock Exchange.
The remaining 30-percent stake in SC72 is owned by Monte Oro Resources and Energy Inc., headed by businessman Enrique Razon. Brown’s A. Brown & Co. owns 11.4 percent of Monte Oro.
In May, Razon opposed Pangilinan’s plan to bring in a Chinese partner, and was angry to learn that Pangilinan had traveled to Beijing and met with CNOOC officials.
“As the only Filipino-owned company in SC72, bringing in the Chinese is a colossal sign of weakness and poor judgment,” Razon said. “Discussing the possible resources in Recto Bank is an ill-advised move.”
Razon said Pangilinan went to Beijing on his own accord and he did not speak for the other partners in the consortium.
“Any discussion he had with CNOOC is only as far as the share of [his] group is concerned,” Razon said.
Razon spoke as the Philippines and China were wrangling anew over Recto Bank, a reef outside the disputed Spratly group of islands in the West Philippine Sea.
A month later, the Philippines and China began to face off with each other at Scarborough Shoal, another resource-rich reef in the contested waters, which, although within the Philippines’ exclusive economic zone, China insists is part of its territory.
The standoff appeared to have been defused in mid-June with an agreement for the withdrawal of the countries’ vessels from the shoal. Two Philippine vessels returned home on the night of June 15, supposedly to take shelter from a coming typhoon.
But the Chinese vessels stayed, keeping China in control of the shoal.
The Philippines is preparing to redeploy government vessels to the shoal. With a report from Gil C. Cabacungan
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