Plan for Philippines bid round escalates drama with China

July 24, 2017
Territorial conflict intensifies in the South China Sea.

Territorial conflict intensifies in the South China Sea.

The Philippines government plans to resume oil, gas, and coal licensing of acreage that includes offshore areas over which China asserts control.

A year ago, in a case brought by the Philippines, the Permanent Court of Arbitration rejected Chinese claims to waters the island nation says lie within its exclusive economic zone.

China's determination to ignore the ruling will be tested by a bidding round in December.

On July 13, Ismael Ocampo, director of the Department of Energy's Resource Development Bureau, told reporters in Manila that the offering will include blocks on Rector Bank, the Philippines designation of Reed Bank.

China says history shows Reed Bank is Chinese. The arbitration court disagreed.

The Philippines suspended exploration in the disputed area late in 2014 but craves domestically produced energy, now far below its expanding requirements.

Mercurial President Rodrigo Duterte has tried to improve relations with Beijing.

His predecessor instigated the arbitration case, and Duterte earlier said he wouldn't rush implementation of the ruling.

China's pledge of $24 billion in aid and investment probably stoked his patience.

Pecuniary diplomacy also has emerged in other countries troubled by Chinese expansionism, including Brunei, Malaysia, and Vietnam.

It's an apparent effort by Beijing to avoid new arbitration and can be seen as retreat.

In fact, Vietnam's largely unchallenged exploration in disputed waters might have emboldened Duterte to test Beijing's resolve with the bidding round.

Or maybe Duterte felt obliged, for political reasons, to address his allegations of bullying.

In May, Duterte said that at a meeting of the Association of South East Asian Nations, Chinese President Xi Jingping warned him not to implement the arbitration ruling, saying doing so would provoke war (OGJ, May 29, 2017, p. 25).

Xi, according to Duterte, insisted China would explore for oil and gas where the Philippines government now says it will sanction drilling.

At this stage in an escalating drama, there's no clear script plotting a tidy finale.

(From the subscription area of, posted July 14, 2017; author's e-mail: [email protected].)

About the Author

Bob Tippee | Editor

Bob Tippee has been chief editor of Oil & Gas Journal since January 1999 and a member of the Journal staff since October 1977. Before joining the magazine, he worked as a reporter at the Tulsa World and served for four years as an officer in the US Air Force. A native of St. Louis, he holds a degree in journalism from the University of Tulsa.