Beijing-Manila Oil Deal Underway In South China Sea

The Philippines is set to enter into a deal with China to jointly explore energy resources in the South China Sea, called the West Philippine Sea in the Philippines, the Manila-based Inquirer newspaper reported on Wednesday morning, citing officials from Philippine President Duterte’s office.

According to the report, Philippine officials said they were in talks with their Chinese counterparts to finalize a deal that could see both sides working to find oil and natural gas in the South China Sea.

“What we are looking at is a deal that will first cover exploration activities in uncontested areas,” said an administration official, who spoke on condition of anonymity because sensitive negotiations were still ongoing.

The report comes as recently elected Philippine President Rodrigo Duterte cools relations with long-time ally the U.S., and moves closer to Beijing – a controversial move that critics both within and outside the country question.

Duterte took office shortly after The Permanent Court of Arbitration at The Hague issued a scathing report in July against China in favor of the Philippines over Beijing’s claim to more than 80% of the South China Sea, including areas within the Philippines’ UN-mandated exclusive economic zones (EEZ).

In 2012, after a terse stand-off between Chinese maritime vessels and the Philippine navy, China seized Scarborough Shoal in the South China, which is clearly within Manila’s EEZ.

Up to and shortly after the ruling, Sino-U.S. tensions worsened as Beijing accused Washington of meddling in its affairs by showing support for Manila.

Now, however, with what can arguably be called the Philippines’ pivot away from Washington to Beijing, tensions in the South China Sea – at least for now – have cooled down.

What’s up for grabs?

Though there are conflicting reports about just how much oil and natural gas lies underneath the South China Sea, there could be more oil than originally thought. 

An U.S. Geological Survey (USGS) study in 2010 is the most recent report on potential hydrocarbon resources in the area. It states that there is a 95% chance that there is at least 750 million barrels of oil in the South China Sea Platform, a median chance of around 2,000 million barrels, and a low probability (5%) of over 5,000 million barrels.

The South China Sea Platform, according to geologists, is an area rich with source carbon and has the perfect geological conditions necessary for hydrocarbon development, particularly oil. It includes the area containing the Spratly Islands, Dangerous Ground, and the Reed Tablemount – all disputed South China Sea claims.

A major oil field  is one that is considered to hold over 500 million barrels of oil. In this case, the South China Sea would hold enough oil to be considered one of the world’s major oil fields, albeit offshore. Worthy of note is that these figures are for possible resources and not proven or even probable reserves.

Forbes