It’s public knowledge that President Duterte himself admitted that it’ll be difficult to exploit oil and gas resources in the South China Sea because of ongoing territorial disputes, especially one between China and the Philippines. This is the same reason why Philex Petroleum a.k.a. PXP Energy, which holds exploration and drilling rights over Reed Bank (SC 72), repeatedly failed in its moves to establish operations in the area.
PXP Energy’s 2018 Audited Financial Statement said Sampaguita gas field in Reed Bank is estimated to contain 2.6 trillion cu. ft. in discovered reserves and up to 5.4 trillion cu. ft. of undiscovered reserves.
The January 2019 US Natural Gas industrial price is USD 5.04 dollars per thousand cu. ft.. Using this figure, the Sampaguita Gas Field contains around US$13.1 billion in discovered reserves and around US$ 27.2 billion in undiscovered reserves. That’s about Php 674 billion and Php 1.4 trillion, respectively (PHP:USD = 51.44:1).
PH-CHINA OIL EXPLORATION MOU: A WAY FORWARD
On 21 November 2018, Philippine President Rodrigo Duterte and Chinese President Xi Jinping in a historic move signed a Memorandum of Understanding (MoU) on joint exploration in the South China Sea, providing both parties a diplomatic way to move forward with mutually taking economic advantage of South China Sea’s idle petroleum resources.Through the MoU, each party will form a Working Group that “will negotiate and agree on… technical and commercial arrangements that will apply in the relevant working area.”
That is, each side will have teams that will set terms regarding who does what in the drilling and exploration process, who gets how much of the profits, and whom the end-products will be sold to.
China authorized its state-owned China National Offshore Oil Corporation (CNOOC) as the Chinese enterprise for each China-side working group, while the Philippines will authorize firms with active services contracts for a given area or, if there’s none, the state-owned Philippine National Oil Company.
MoU’s are essentially just agreements to agree, i.e. it is a very preliminary phase of any prospective oil and gas project in the South China Sea. However, the MoU states that China and the Philippines will strive to finalize cooperation agreements within 12 months of the MoU, i.e. by November 2019.
PXP ENERGY AND DENNIS UY
On 04 December 2018 and given the MoU, Energy Secretary Alfonso Cusi told PXP Energy that it can start applying for the lifting of the ban on oil and gas exploration in Reed Bank, which DOE declared in 2014 amidst escalating tensions in the South China Sea.On 21 December 2018, PXP Energy announced that it has formally requested the Energy Department to lift the said ban.
On 27 December 2018, PXP Energy and Dennis Uy’s Dennison Holdings Corporation disclosed that they will be sealing an oil and gas exploration deal over Reed Bank by March 2019. A separate news report said this is subject to CNOOC’s approval and consent, presumably in accordance with the November 2018 PH-China MoU.
The MoU really is very welcome news for PXP Energy, known to perennially post losses and whose continued existence, judging from its financial reports, lies heavily on the hope that it can finally tap Reed Bank.
Additionally, PXP Energy’s prospective partnership with Dennis Uy provides the financially struggling company with much-needed liquidity plus a possibly more favorable relationship with Malacanang given Dennis Uy’s perceived closeness to the President and his men.
For PXP Energy, so far, so good.
HOPE DIMS FOR PXP ENERGY
Is China willing to work with PXP Energy and Dennison in Reed Bank? Let’s see.On 11 January 2019, Dennis Uy’s Phoenix Petroleum disclosed that DOE greenlighted its partnership with CNOOC to build a US$ 2 billion Liquefied Natural Gas import terminal in Batangas.
On 01 February 2019, Phoenix’s Board seconded DOE’s approval as it gave go-signal for the Phoenix-CNOOC Tanglawan joint venture.
China appears to be very much willing to work with Phoenix and by extension, Dennis Uy. Given that Uy is prospectively partnering with PXP over Reed Bank, it’s so far so good for PXP, until…
On 28 February 2019, PXP chairman Manuel V. Pangilinan said PXP reached out to the Chinese CNOOC but “it’s radio silence on their part.”
China, while willing to work with Uy, is apparently unwilling to work with Pangilinan. It seems that Duterte’s good relations with Beijing isn’t enough to make China forget its experience with Pangilinan in 2012, when Beijing rejected Pangilinan’s 2012 oil and gas exploration proposal directed to CNOOC.
On 01 March 2019, Phoenix, CNOOC, and PNOC signed MoU for the Tanglawan LNG Plant.
On the same day, President Duterte threated to shut down Pangilinan’s PLDT for busy anti-graft hotline 8888. He also accused PLDT of owing the government Php 8 billion, along with a subtle threat when he said “no President has ever asked for payment”, an accusation that Pangilinan denied.
China seems to still dislike PXP Energy and to makes matters worse, Duterte seems to feel the same about its owner.
DENNIS UY DITCHES PXP ENERGY
Just when I thought PXP Energy’s relationship with China can’t get any worse…On 13 March 2019, former Philippine Foreign Secretary Albert Del Rosario accused China President Xi Jinping of Crimes Against Humanity at the International Criminal Court.
Del Rosario is a director of Hong Kong-based First Pacific, PXP Energy's parent company.
I can’t imagine how China will take Del Rosario’s brash moves lightly, and true enough, it was all downhill from there.
On 29 March 2019, PXP Energy disclosed that is has terminated its deal with Dennison Holdings, i.e. Dennis Uy is now out of the Reed Bank exploration project.
Dennison effectively jettisoned PXP energy from its future plans: is this merely a coincidence or a result of how China and Duterte view Pangilinan?
On 01 April 2019, PXP Energy share prices nose-dived by nearly 19%. This is the business day immediately succeeding the 29 March 2019 announcement of the PXP-Dennison split.
On 10 April 2019, PXP Energy disclosed its latest list of Top 100 Stockholders, which includes former Foreign Secretary Albert del Rosario.
On 15 April 2019, PXP’s stocks plunged to Php 6.84 a share, down 44% from 29 March 2019’s Php 12.28 [https://bloom.bg/2Lb1nLx].
Things are looking really bad for del Rosario's PXP energy.
IF CHINA LIKES DENNIS UY…
Beijing apparently sees PXP Energy and Dennis Uy on the opposite sides of the Likeability Spectrum.On 16 April 2019, Phoenix and PNOC execs visited CNOOC’s LNG plant in China, which shall be used as a pattern for the Tanglawan LNG plant.
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| Phoenix Petroleum's Dennis Uy, CNOOC's Wu Zhengxing, and PNOC's Reuben Lista sign a Memorandum of Understanding for the Tanglawan LNG project. |
As Pangilinan and PXP struggle, Uy appears to blossom.
On 08 May 2019, PXP Energy disclosed that it “will take guidance from the Philippine Government” in as far as its Reed Bank interests, and said it hopes that DoE lifts the ban on exploration soon.
Nothing new here, although PXP’s stock prices relatively stabilized after the announcement.
On 27 May 2019, Dennis Uy said PXP Energy and his Dennison Holdings agreed to ditch their deal because of “uncertainty of government-to-government” transactions. PXP Energy in a PSE disclosure welcomed Uy’s statement and said PXP energy is at the moment focused on lifting the DoE ban on SC 72 and 75 “to allow exploration activities to resume.”
I think this is very telling.
Judging from these, it appears that China is open to jointly explore and exploit with the Philippines the South China Sea for oil, but that she doesn't wanna do it with PXP Energy.
We know that China like Dennis Uy and China dislikes PXP Energy. If there’s uncertainty in government-to-government transactions, and the only major variables are China, PXP, and Uy, then which major variable is the likely cause of uncertainty?
The Cause of Uncertainty
Note that I have been using the phrase “dislikes PXP Energy” instead of “dislikes Pangilinan”. It is still unclear to me if China has beef with Pangilinan per se or with First Pacific in general, and I am inclined to believe it’s the latter given Del Rosario’s overtures.But to solely blame the uncertainty to PXP is unfair, especially since no less than Foreign Secretary Teddy Boy Locsin insisted drafting the joint exploration agreement. This is the same Locsin that, a highly placed government source says, is an Amboy who spends more time in New York than in the DFA headquarters on Roxas Boulevard.
The same source, whose identity will remain concealed for his safety, told this writer:
“President Xi and Foreign Minister Wang Yi sent signals that we are moving towards joint exploration because it doesn’t make sense to place everything on hold. Our own DoE has been saying that we need alternatives to Malampaya (Gas Facility), but remember that Sec. Locsin demanded that he’ll be the author of any joint exploration agreement.”Locsin has not been sufficiently subtle in his general dislike for China when he unilaterally revamped President Duterte’s independent foreign policy from “Friend to All, Enemy to None” to the more angsty (and less eloquent) “Friend to Friends, Enemy to Enemies, and Worse Enemies to False Friends.”, in an apparent swipe at China.
This is despite Malacañang repeated assertions that Duterte’s pre-Locsin foreign policy stays.
Suffice it to say, aside from China’s apparent dislike for PXP, the American-leaning Locsin seems to also be in the way.
THE JUNE 2019 REED BANK INCIDENT
The developments up to the end of May 2019 seem to imply that Reed Bank exploration is a no go for the foreseeable future as far as PXP Energy stockholder and First Pacific director Albert del Rosario is concerned.Then suddenly…
On 12 June 2019, Defense Secretary Delfin Lorenzana announced a collision of two shipping vessels – one Chinese and another Filipino – in Reed Bank.
Then a day later…
On 13 June 2019, Del Rosario in response to Lorenzana said the Philippines must now consider a multilateral approach on the South China Sea Issue, citing that China has absolutely no respect for the Rule of Law.
The Philippines under Duterte adopted a bilateral approach over the SCS dispute, i.e. Manila dialogues directly with Beijing with no other state actors involved.
The multilateral approach that del Rosario insists on means the inclusion of other states in talks, other states like those within the ASEAN and most likely, the United States.
It is common knowledge in government circles that Del Rosario leans heavily towards the United States
The US-educated Del Rosario is very intimately linked with the pro-Washington US-Philippine Society where PXP’s Pangilinan also sits as co-chairman and where top US diplomat and George W. Bush-era State Secretary John Negroponte serves as president.
SOMETHING FISHY ABOUT DEL ROSARIO’S LATEST
Del Rosario immediately blamed Beijing for the collision despite the fact that investigations have yet to commence, which is the total opposite what happened just a few years prior, when he was still DFA Secretary.Del Rosario’s reaction is in stark contrast with a similar incident in 2014, or when a Hong Kong-registered commercial ship collided with a Philippine fishing boat, killing a Filipino fisherman and leaving four others missing.
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CULPRIT? The Hong Kong-registered, 195-meter MV Peach Mountain is suspected to have rammed a Philippine fishing boat on June 20 off the waters of Bolinao in Pangasinan. Survivors say their fishing boat is similar in size to the 13-meter vessel shown above. (via Inquirer)
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Does del Rosario have something to do with the incident?
I cannot help but wonder as succeeding events revealed major plot holes in the anti-China narratives of the political opposition, where del Rosario belongs.
FIRST, the 12 June 2019 Lorenzana statement was immediately followed by a media blitz that is still running as of this article’s writing, with the general tone that share pretty much the same wavelength as Del Rosario’s 13 June 2019 statements.
SECOND, the media blitz shortly later included anti-China statements from the Filipino fishing vessel’s captain, despite the ship’s cook later admitting that the captain was asleep when the incident happened.
THIRD, up to this day, none of the 22 affected fishermen have executed sworn affidavits and continued to grant media interviews. Apparently, none of del Rosario’s allies, many of whom are lawyers, explained to the fishermen that the longer they wait to execute an affidavit, the easier it is to impeach their testimonies in court.
The list of inconsistencies in the Anti-china version of events goes on and on, suggesting that the prematurely anti-Beijing rhetoric, at the least, is staged.
DEL ROSARIO WITH HELP FROM LOCSIN
And apparently, with a bit of help from Locsin, whether Locsin is aware of it or not.On 15 June 2019, the Chinese Embassy in Manila, in response to the incident, promised to “handle this issue with the Philippines in a serious and responsible manner”.
On 18 June 2019, the Chinese Foreign Ministry in a very mildly worded statement extended its sympathy to the Filipino fishermen and followed up with an offer to jointly investigate the incident with its Philippine counterparts, an offer that Malacañang seriously considered.
China's calm and reconciliatory tone in both statements is a total departure from the harsh rhetoric it used during the Aquino Era, suggesting, at least at first glance, that China was also surprised by the June incident.
Shortly after Malacañang showed some inclination towards a joint China-Philippine investigation, Foreign Secretary Locsin categorically rejected China’s offer.
On 18 June 2019, Locsin tweeted, “There cannot be a joint investigation. First principle of justice: no one can be judge of his own case...”.
Locsin’s grandstanding is odd, if not utterly stupid.
Malacañang, or where Locsin takes orders from, already said it’s inclined to accept the Chinese offer of a joint investigation, and last time I checked, Locsin is NOT the President.
Moreover, the clause “no one can be judge of his own case“ (Latin: Nemo judex in causa sua), is a legal principle which states that no person can judge a case in which he has an interest in.
While China indeed has an interest in the Reed Bank Incident, the Philippines does too. That principle applies to both China and Philippines so Locsin, wittingly or (more likely) unwittingly, suggested a third party should the investigate, which would turn a bilateral issue into a multilateral one.
Sounds familiar? Yes, because del Rosario used the same term a day after Lorenzana’s announcement.
Malacañang immediate corrected Locsin a day later when…
On 22 June 2019, Malacañang said it “welcomes and accepts the offer of the Chinese Government to conduct a joint investigation…”
But seriously, what can we expect from a Foreign Secretary who conducts Foreign Policy over Twitter?
ANOTHER DEL ROSARIO PR STUNT
While Locsin was busy defying Duterte…On 21 June 2019, del Rosario engaged in yet another PR stunt when he attempted to enter Hong Kong and told the immigration counter that his purpose for visit is to attend a First Pacific board meeting.
Yes, he told China in China that he will be reporting to First Pacific in China, the same First Pacific that controls PXP Energy that China seems to deeply detest.
Del Rosario even (mis)used his courtesy diplomatic passport, suggesting that his HK tête-à-tête is official business of the Philippine Government. He was denied entry, of course.
A day later, DFA said it’s cancelling all courtesy diplomatic passports issued to former Foreign Secretaries and retired ambassadors, halting del Rosario’s PR barrage.
Del Rosario on a final attempt at a Dick Cheney?
As Leiden University-educated International Relations scholar and Maastricht University lecturer Sass Sasot pointed out, it appears that former Foreign Sec. Albert del Rosario has been doing to the South China Sea what US VP Dick Cheney did to Iraq in 2003.
Former Halliburton CEO Dick Cheney resigned from the oil giant shortly before he became the Vice-president of the United States. While keeping his business interests in Halliburton, he fiercely advocated for the US invasion of Iraq, killing hundreds of thousands of civilians and armed personnel. Halliburton, as soon as the war ended, emerged the winner as it snagged billions of dollars’ worth of Iraqi reconstruction contracts, with the first US$489 million for its subsidiary Kellogg, Brown and Root.
Del Rosario, meanwhile, resigned from First Pacific and because the Foreign Secretary. While keeping his interests in First Pacific subsidiary PXP Energy, del Rosario crafted the Aquino-era Philippine Foreign Policy, which heavily relies on the existence of the 1951 US-PH Mutually Defense Treaty
The only significant difference from that Cheney and this one is that Cheney has already succeeded in promoting a war, while del Rosario is apparently still trying his best: del Rosario seems to be desperately trying to start a war that will benefit his own business interests…
Oil and gas for his pockets, at the expense of the Filipino People?
No, thank you. [ThinkingPinoy | RJ Nieto]
(For comments, suggestions, and reactions, please send an email to tp[at]thinkingpinoy.net)
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