The Philippines' government is in talks with an unnamed state Chinese oil company to discuss the opportunities for joint oil and gas exploration in the South China Sea. Earlier this month, China and the Philippines set up a panel to study ways of resolving their rival claims to parts of the South China Sea that may contain oil and gas reserves.
These developments come after years of the two disputing parts of the South China Sea. China claims ownership over almost all of the sea-a stance that has angered its neighbors in the area. Two years ago, the Philippines won a lawsuit against China, but the latter refused to acknowledge the court's ruling.
Now, the two have decided to really give the alternative approach a go. The idea of partnering on oil and gas exploration in the South China Sea is not new, but so far has failed. Now there seems to be genuine will on both sides to come to a mutually beneficial solution to the problem.
For the Philippines' President Rodrigo Duterte, joint exploration is the alternative to an open conflict. "Now their (Beijing's) offer is joint exploration, which is like co-ownership. It's like the two of us would be the owners. I think that's better than fighting," Duterte said recently.
The Chinese company as well as the specific areas where joint exploration will be conducted have remained unnamed for the time being. Last month, however, Duterte's spokesman, Harry Roque, told media that "We might enter into an agreement with a Chinese-owned corporation, not the Chinese state itself."
Negotiating with a company rather than government officials would leave the issue of sovereignty, which is the most sensitive one between the two countries, out of the negotiations.
Related: EIA's Shocking U.S. Oil Production Predictions
The South China Sea may hold 28 billion barrels of oil, according to an estimate from the U.S. Geological Survey from the mid-90s. Since then, with technology improvements, the oil it holds could be much more.
Besides the Philippines, Vietnam, Malaysia, Taiwan, and Brunei also have claims to parts of the sea. For the Philippines, however, the situation is urgent: its economy is growing fast, and the country needs to find a way to satisfy the growing energy demand that comes with a flourishing economy.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More