Policy split risks oil, gas prospects

A policy divide over the Philippines’ approach to the West Philippine Sea (WPS) is raising concerns about potential risks to oil and gas development, among other issues, following competing interpretations of the 2016 arbitral ruling.

Retired Senior Associate Justice Antonio Carpio said in a media statement on Wednesday that a proposal by former diplomats that pushed for closer engagement with China and joint resource development could misrepresent the legal basis for the country’s energy rights.

“The award did not say this because this would mean the utter destruction of UNCLOS,” Carpio said. “This ‘conclusion’ of the paper written by retired diplomats is laughable,” he added.

The group of retired diplomats — including ambassadors Raul Rabe, Jose Syjuco Jr., Nelson Laviña, Generoso Calonge, Jesus Yabes, George Reyes, Lamberto Monsanto, Lourdes Morales and Virgilio Reyes Jr. — argued for a “rapprochement with China” and joint exploitation of resources such as oil and natural gas, particularly in areas like Reed Bank.

The WPS remains central to the Philippines’ energy prospects.

The proposal involved the proposed Reed Bank oil venture with China under a structure in which 60 percent of voting shares would be given to the Filipino firm, 40 percent to the Chinese partner, and an additional 20 percent in preferred, non-voting stock.

The formula addressed Beijing’s demand for “equal partnership” while complying with the Constitution’s 60-percent Filipino ownership rule.

It also suggested decoupling from the US Mutual Defense Treaty and adopting strict neutrality while exploring BRICS integration.

Carpio’s counter-arguments were based on the 2016 Arbitral Award that China does not recognize.

He argued that accepting the diplomats’ premise would mean the “utter destruction of UNCLOS (United Nations Convention on the Law of the Seas).”

The 2016 award also ruled that Reed Bank is a submerged feature within the Philippines’ exclusive economic zone (EEZ) and is not subject to any overlapping entitlement by China.

Under UNCLOS Articles 77 and 81, the coastal state has exclusive rights to explore and exploit the resources.

The 1987 Constitution (Article XII, Section 2), likewise, mandates that the exploration, development, and utilization of natural resources shall be under the full control and supervision of the State.

The international tribunal similarly found that China’s “nine-dash line” had no legal basis for resource claims within the EEZs of other states.

Next energy frontier

The Reed Bank or Recto Bank, within the country’s EEZ, is among the key areas believed to contain significant natural gas reserves.

Department of Energy data indicated the area may contain more than six million barrels of oil and over seven billion cubic feet of natural gas, classified as undiscovered resources.

Analysts said the debate could affect investor confidence in offshore energy projects, where legal clarity is critical.

Jeffrey Ordaniel, president of the West Philippine Sea Institute, warned that the proposal risks shifting away from rules-based governance.

“This runs counter to the Philippines’ longstanding commitment to international law and peaceful dispute resolution,” he said.

“Despite a lack of actual progress, those episodes of giving China preferential treatment handed Beijing propaganda materials to manufacture a false atmosphere of cooperation and compromise while evading accountability for its continued coercion,” Ordaniel said.

Dr. Renato de Castro of the Stratbase Institute also cautioned against relying too heavily on diplomacy.

“Relying solely on diplomacy to pursue a policy of hedging is simply appeasement that emboldens China to be more expansionist and aggressive in the West Philippine Sea,” he said.

Amid global uncertainties, particularly tensions in the Middle East, the Department of Foreign Affairs earlier said Manila and Beijing have discussed the need to ensure stable access to energy and fertilizer, as well as potential cooperation in renewable energy, trade and agriculture.