Filipino, China oil firms eye deal in disputed sea

Philippine Energy Secretary Jericho Petilla talks to foreign correspondents based in Manila during a forum with President Benigno Aquino III Wednesday Oct. 23, 2013 in Manila, Philippines. Petilla said a partly-Filipino owned energy company has begun talks with China’s state-run oil company on a possible commercial agreement to jointly explore and extract oil and gas at the Reed Bank, a vast offshore area in the South China Sea which is disputed by China and the Philippines. (AP Photo/Bullit Marquez)

MANILA — A Filipino-British company has begun talks with China’s state-owned offshore oil producer for a deal to jointly explore for oil and gas in the Reed Bank, a vast offshore area disputed between China and the Philippines, a Filipino official said Wednesday.

Energy Secretary Jericho Petilla said the talks between London-based Forum Energy plc and China National Offshore Oil Corporation, or CNOOC, were at a preliminary stage. He added a commercial agreement could hopefully be reached despite the long-raging disputes over the Reed Bank.

The talks were being held abroad, mostly recently in Hong Kong, he said.

The alternative to not entering into a business partnership “is not to drill, probably forever.” Petilla said.

President Benigno Aquino III said any such deal with China would have to conform to Philippine laws. The Reed Bank northwest of the Philippine province of Palawan lies clearly within his country’s exclusive economic zone, Aquino said.

The territorial conflict has hampered oil exploration in the offshore area, Petilla said, but added the Philippines needed to find a way to tap its potentially huge oil and gas deposits to meet his country’s growing energy demand. Natural gas deposits at a nearby offshore field called Malampaya are expected to run out in 2024, he said, adding it takes about a decade to develop such a gas field.

China and the Philippines, along with Brunei, Malaysia, Taiwan and Vietnam, have been contesting ownership of the clusters of mostly barren islands, islets, reefs and surrounding waters in the South China Sea for years. There have been fears that the disputes could spark Asia’s next major armed conflict and block free passage in the busy sealanes, where the bulk of the oil and cargo that fuel Asia’s bustling economies are transported.

Chinese ships tried to drive away a Philippine exploration vessel at the Reed Bank in March 2011. A Philippine general deployed two air force planes but the Chinese patrol ships have left by the time the aircraft reached the contested area.

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