Cayetano denies joint oil and gas exploration with China

Department of Foreign Affairs (DFA) Secretary Alan Peter Cayetano denied on Tuesday, August 7, any oil and gas exploration with China in the West Philippine Sea.

Cayetano said that the joint venture between the two countries will be “commercial” in nature.

“It will be a commercial venture. I think that’s a smarter thing to do but as I’ve said these are preliminary talks but we don’t, as of now there are no plans on the Philippine government side,” Cayetano said in a report from the Philippine Star.

In the same report, Cayetano assured that the government will spend nothing in the said venture and that it will be “among private entities.”

Cayetano: Venture with China is constitutional

The foreign affairs secretary was quick to defend himself from his critics stating that the venture will be in line with the 1987 Constitution.

“We cannot come up with any agreement that is unconstitutional,” Cayetano said.

However, he also noted that pushing for such a project with China will undergo so much scrutiny. He assured the public that they will draft a framework so the Supreme Court will declare the venture “constitutional.”

The Philippine Constitution clearly states that the natural resources in the territory “will be under the full control and supervision of the state”. It also permits “joint venture” with Filipino citizens or corporations or associations, provided that at least 60 percent of the capital is owned by such citizens.

A provision from Foreign Investments Act of 1991 or the Republic Act 7042 indicates that economic activities with foreign ownership involving natural resources and land ownership must be limited to a maximum of 40 percent.

Possible conflict with the arbitral ruling

Acting Chief Justice Antonio Carpio, one of Cayetano’s known critic, warned that the country’s sovereignty might be compromised in the said scheme.

“As long as the joint development complies with the Philippine Constitution and there is no waiver of our sovereign rights under the arbitral ruling, I have no objection,” Carpio said.

In a report from ABS-CBN News, former president Benigno “Noynoy” Aquino III said that the Philippines has no obligation to share resources with China.

“Dito, exclusive economic zone ang pinag-uusapan eh, parang wala tayong obligasyon na makihati sa kanila. (We’re talking about our exclusive economic zone, it seems that we don’t have an obligation to share with them),” Aquino said.

In July 2016, the Permanent Court for Arbitration (PCA) in The Hague, Netherlands ruled in favor of the Philippines in its case against China over the West Philippine Sea. The arbitration declared that China had no legal basis in its claim of the area.

In the same report, analysts perceived that joint explorations with China in disputed waters could “somehow give up” the Philippines’ arbitration win.

Commercial venture similar to Malampaya

According to Cayetano, the Philippines is trying to secure a project similar or even better than that in Malampaya.

“If any country, including China, is willing to give us in disputed areas the same (share) that we got in Malampaya, how can anyone argue that we lost our sovereign rights?” Cayetano said.

The Malampaya Deepwater Gas-to-Power Project under Service Contract (SC) 38 indicates that 70 percent of the sale of natural gas would go to the contractor to recover the investment cost. The remaining 30 percent is shared by the government and the consortium on a 60-40 basis, respectively.

Malampaya field is a platform in the West Philippine Sea about 80 kilometers northwest of Palawan island. It is considered a joint undertaking of the Philippine government and the private sector since the project is spearheaded by the Department of Energy (DOE) and operated by Shell Philippines Exploration B.V. (SPEX).

Cayetano said that the possible venture with Beijing’s The Reed Bank would pose as an alternative for Malampaya which is forecasted to run out in 2024.

“For us, since it’s an urgent need, and it will benefit all Filipinos, I wanna work double time on it and I’m hoping our side of the working group can do a lot this August and then try to hit September or October,” the diplomat said.