After Manila Lifts Ban, CNOOC and Philippine Firm Restart Negotiations to Jointly Explore Energy Assets in Disputed Parts of the South China Sea

On October 19, the Philippine company PXP Energy Corporation announced that it was in negotiations with state-owned China National Offshore Oil Corporation (CNOOC) to finalize a memorandum of understanding on joint oil and gas development in the South China Sea.  PXP’s subsidiary, Forum, is reportedly holding the negotiations.  This follows the Philippine government’s unilateral lifting on October 15 of a six-year ban on oil and gas exploration in the parts of the sea that are disputed with China.

Manila claimed that the decision was “imperative” to the country’s energy security, as its current gas reserves in the offshore Malampaya gas field near the western province of Palawan were depleting.  The Malampaya gas field supplies approximately 40% of the energy needs of the country’s Luzon region.  A previous iteration of an MoU between PXP and CNOOC was reportedly under negotiation in 2018, but the Philippine government never acted on lifting the exploration moratorium in disputed waters.

Although there does not appear yet to be any final agreement between CNOOC and PXP, reports indicate that the Philippine Department of Energy has already issued a formal “resume-to-work” notice to PXP Energy, seemingly allowing the company to recommence seismic surveys and exploration activities in the disputed Reed Bank area, offshore of northwest Palawan province.  If the Reed Bank region is proven to have reserves of oil and gas, exploitation and production could require an investment of up to $5–6 billion.