Chinese cooperation to extract our EEZ wealth

Philippine’s 2016 Arbitral Award recognised their sovereign rights to explore, develop, and utilise resources, However, China rejects the AA.

Artemio V. Panganiban

Artemio V. Panganiban

Philippine Daily Inquirer


December 5, 2022

MANILA – President Bongbong Marcos (PBBM) appears frustrated at China’s intransigence in blocking the past administration’s effort to extract the oil and gas resources in our exclusive economic zone (EEZ) in the South China Sea (SCS), saying our government may abandon government-to-government (G2G) talks and “find other ways” to address this “small matter to China [which] for us, is something huge. So, we need to fight for it and benefit from it…”

PBBM IS VISITING CHINA IN JANUARY. Thus, the new administration has a month to diplomatically secure China’s cooperation, within the limits prescribed by our Constitution and without yielding the arbitral gains we already won. In this way, PBBM will be able to alleviate poverty speedily and continue energizing our power plants that provide cleaner and cheaper electricity to our people.

To recall, the July 2016 Arbitral Award (AA) recognized our sovereign rights to explore, develop, and utilize (EDU) the oil, gas, and other resources buried under our EEZ. However, China rejects the AA and insists that almost the entire SCS, including our EEZ, belongs to it by historic title. It reclaimed and fortified several features in the SCS, turning them into military fortresses, airfields, and missile silos. Its huge and well-armed Coast Guard and militia ships swarm our puny military vessels and our fishermen’s ancient, motorized cascos.

While it affirmed our sovereign rights ON, BELOW, and ABOVE our EEZ, the AA did not grant us (and we did not claim) sovereignty or ownership over the LAND areas in the SCS and their territorial seas. In contrast, China strongly asserts sovereignty and ownership over both the maritime and land areas covering almost the entire SCS. It uses its military brawn to enforce its assertions regardless of the AA.

NONETHELESS, CHINA HAS AGREED TO UNDERTAKE “JOINT DEVELOPMENTS” of the resources in our EEZ. To implement these joint developments, a “memorandum of understanding” (MOU)—to reconcile and satisfy the seemingly intractable legal positions of China and the Philippines—must first be concluded on a G2G basis. Thereafter, private concessionaires, local and foreign, can be commercially contracted to set the financial, technical, and management parameters of how to EDU the resources.

Quietly, Chinese and Philippine diplomats have tried for three years to conclude an MOU. Vitally, China had reportedly agreed that “the oil and gas operations shall be subject to the laws of the Philippines” provided the MOU “shall not be interpreted as a renunciation by either party of any right relating to the (SCS), or a recognition of or support for the other party’s position with regard to any claim relating to the area.” I respectfully submit that this simple provision satisfies our Constitution, mainly:

1) The privilege to EDU our marine wealth shall always be under the “full control and supervision of the State” which may “directly (EDU the resources), or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens or corporations or associations at least sixty per centum of whose capital is owned by such citizens…”

2) The President may enter into “agreements with foreign-owned corporations involving either technical or financial assistance for large-scale” ways to EDU “minerals, petroleum and other mineral oils” in our EEZ.

Aware, however, of the “impending change in the administration,” our Department of Foreign Affairs terminated the negotiations in February 2022 to give our newly elected leaders a free hand on whether to continue the negotiations, and if so, under what terms and conditions.

TO EXTRACT AND ENJOY OUR MARITIME WEALTH, the help and cooperation of China, IMHO, is very important, nay, indispensable. It is still the most ubiquitous superpower in our area, despite the occasional freedom of navigation sailings of the US and its allies. In short, China has effective military control over the SCS. No private concessionaire will dare invest billions of dollars and operate in the SCS without China’s assurance of “no interference” and “no swarming.”

Given China’s past willingness to assist and cooperate, I believe we should resume the past initiatives to finally forge an MOU with China to enable us to harness private concessionaires to extract these resources.

fine example is the service contract entered into by the Philippines and the Shell Consortium 20 years ago to EDU the Malampaya area within our EEZ. From 2001 to 2022, our government received over $13 billion in cash from its 60 percent share of the gross earnings, while the extracted natural gas had been used to produce 3,400 megawatts of clean electricity—roughly one-fourth of our country’s requirements.

The natural gas in Malampaya will be exhausted in 2024. With China’s help, our government and/or its private concessionaires (similar to Shell) could continue receiving more cash and more clean energy from areas near Malampaya and from new oil fields (known as SC 72 and 75) in our EEZ.

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