A Newsbreak Exclusive: Exploring the Spratlys
RP sets aside territorial claims to look for oil deposits with China and
Vietnam. (From Newsbreak, August 28, 2006)

By Miriam Grace A. Go
The diplomat draws invisible lines about three to four inches from the Palawan
coastlines on the Philippine map. There's no doubt, he says, that the Spratlys,
"are nearest the Philippines than any other claimant countries." Yet, he says
with a sigh drawn from decades of seeing the Philippines' failure to establish
its territorial claims, "it won't be ours during my lifetime, not even my
grandchildren's lifetime."

Therefore "the way to go," he says, is play into China's so-called common
development strategy with neighbors, which President Deng Xiaoping first
proffered in 1996. The Philippines did get onto the bandwagon and agreed
initially with China, and then with Vietnam, to explore the Spratlys
<http://community.middlebury.edu/~scs/macand/index.htm> for potential petroleum
deposits.

RELATED STORIES:



* FROM OUR ARCHIVES: Making A Claim
* Full text of the PNOC - CNOOC Agreement


On Sept. 1, 2004, the state-owned oil companies, Philippine National Oil Company
(PNOC) <http://www.pnoc.com.ph/> and the China National Offshore Oil Corp.
(CNOOC) <http://en.wikipedia.org/wiki/CNOOC> , signed an agreement for a Joint
Marine Seismic Undertaking (JMSU) in the South China Sea. On March 14, 2005,
that agreement was superseded by a tripartite accord
<http://english.people.com.cn/200511/20/eng20051120_222698.html> that included
the Vietnam Oil and Gas Corp. (PETROVIETNAM)
<http://www.petrovietnam.com.vn/Modules/PVHome.asp> .

But NEWSBREAK learned that involving other claimant countries didn't seem
necessary because several private companies have been exploring the Spratlys
since the 1970s under the Philippine service contract system. These were known
to other claimants, but no protest was ever filed.

The 142,886 square kilometers that the geophysical survey covers is very well
"within our claims," acknowledges the diplomat, who requested not to be named
because of the sensitivity of the topic. However, the Department of Foreign
Affairs (DFA) didn't question the project when it was being negotiated because
"it looked like it was a done deal." And it was: it had the blessings of
Malacañang.

Should survey data confirm the long-held belief that large oil deposits lie in
the seabed of the Spratlys, the estimates of reserves-from 2 billion to 200
billion barrels-could give the Philippines and its Southeast Asian neighbors,
currently all import-dependent, a steadier oil supply at cheaper prices.

PNOC president Eduardo Mañalac, who was instrumental in forging the agreement,
says that if such potential is discovered through the JMSU, the governments
would hopefully consider settling the territorial dispute by negotiation so they
can all partake of Spratly's resources.

The agreement provides, too, that "the signing of this Agreement...shall not
undermine the basic position held by the Government of each Party on the South
China Sea issue."

The issue is not that simple, however. Legal and diplomatic experts say that by
agreeing to what Mañalac calls "a purely commercial transaction supported by the
respective governments," the Philippines may have effectively agreed to limit
its sovereignty, even to give up its claims, over the Spratlys, which is locally
called the Kalayaan Group of Islands.

These experts say that the agreement suffers from legal infirmities, and in some
aspects goes against the Constitution. It could even be a ground to impeach
President Arroyo.

Chinese-Friendly

When she was vice president, and in the beginning of her presidency, Gloria
Macapagal Arroyo reportedly sent memoranda to the DFA about China's idea of
jointly developing disputed areas with claimant countries. The memoranda,
according to those privy to them, informed the department of the proposal, and
didn't imply any endorsement. It nevertheless indicated her openness to the
idea.

In 2002, Arroyo appointed Mañalac, an experienced exploration geologist, as
undersecretary at the Department of Energy (DOE) right after his seven-year
stint in China. As executive of the American firm Philips Petroleum, Mañalac had
dealt with the CNOOC and was given the highest possible award by the Chinese
government for having discovered the largest oil deposit in the offshore of
China.

From early 2003 to 2004, Philippine and China officials had a series of meetings
on the Spratlys project. During that period, negotiations were simultaneously
conducted for big Chinese investments in the Philippines, including the now
controversial North Rail project. At the time, newspapers reported the frequent
visits of Speaker Jose de Venecia Jr. to China supposedly for parliamentary
networking. His delegation, however, always included economic managers of the
Arroyo government.

On Aug. 30, 2004, Mañalac was appointed president and chief executive officer of
PNOC. Two days later, the PNOC and CNOOC signed in Beijing the JMSU agreement
that covers the Spratlys, a copy
<http://s17.quicksharing.com/v/4448671/1v006i17_spratlys_RPChinaExploration_agre\
ement.doc.html> of which was obtained by NEWSBREAK.

Mañalac said the PNOC consulted with the justice and foreign affairs
departments. The agencies welcomed the idea, but "they had doubts about its
do-ability." Sources at the DFA say there was a time when the PNOC was always in
touch with the office of then Undersecretary for Policy Sonia Brady, but they
are not certain if this was during the negotiations for an agreement with China,
or after Hanoi protested upon learning about the agreement that excluded
Vietnam. Brady is now the Philippine ambassador to China.

The day after the signing of the agreement in Beijing, Hanoi wrote the
Philippines to protest its exclusion from the project when it has a claim over
the Spratlys, too. Thus, the tripartite agreement for a JMSU by the three
countries was signed in Manila months later.

According to the three-year agreement, China would gather the data, Vietnam
would process them, and the Philippines would interpret them.

In every stage, one or two representatives from the two other countries (which
is not the lead country) would be present. Each party will shell out US$5
million for the project. The data are now in Manila for interpretation, which is
expected to be completed by October. If data from 11,000 kilometers across the
underwater area proves encouraging, another round of geophysical survey will be
conducted, as long as the agreement has not expired.

A Treaty is Required

The agreement, however, raises legal questions. Why was a project involving a
contentious area signed only by government-owned and controlled corporations
(GOCCS) and not by governments?

Lawyer Harry Roque, director of the Institute of International Legal Studies of
the University of the Philippines, explains that under the United Nations
Convention on the Laws of the Sea or UNCLOS, coastal states have the "exclusive
right to explore and exploit the natural resources" found in the continental
shelf and the exclusive economic zone (EEZ) 200 nautical miles from their
above-water borders. Since the Philippine Constitution and a law (Presidential
Decree 1596) say that the Spratlys is part of the country, it follows that the
EEZ around the Spratlys should be for the Philippines' exclusive exploitation.

"Clearly, an agreement to jointly survey for the existence of petroleum
resources in the Spratlys would be a derogation of the country's sovereign
rights [because] the exploration here would cease to be exclusive," Roque said.

The Philippines may choose to "limit its sovereignty through entering into such
an agreement," Roque explained, but it should be done through a treaty, as
required by international laws. In the case of a treaty, the JMSU agreement
should have been sent to the Senate for approval, as required by 1987
Constitution.

"A Filipino GOCC could not redefine what is provided for by law," Roque said.

Roque even thinks that President Arroyo can be impeached for allowing a
government entity enter this agreement. "My position is that anyone who will
give away Philippine territory is guilty of treason. Since the national
territory is governed by the Constitution and by law, a President who will
surrender the exercise of sovereign rights is guilty of treason, an impeachable
offense.

Foregone Claims?

The project, its proponents say, has diplomatic basis, referring to the
Declaration on the Conduct of Parties in the South China Sea. It was signed in
2002 by member-states of the Association of Southeast Asian Nations and China.
It was supposed to develop confidence among countries. It was supposed to
develop confidence among countries after many years of occasional skirmishes or
conflicts between claimant countries.

The document doesn't legally bind the signatories and was just a political
statement, says Ralf Emmers <http://www.nira.go.jp/ice/libe/prw/dat/2049.html> ,
a Singapore-based expert on the South China Sea security issues. The code of
conduct may not be able to prevent further clashes over the territories, he said
in a September 2005 paper.

Still, the JMSU agreement has positive aspects, specifically in relation to the
Philippine claim on an extended continental shelf, the evidence for which should
be submitted to the United Nations (UN) by 2009. The Philippines contends that
the continental shelf (an under-water landmass that has thinned out over
millions of years) in the Spratlys is an extension of the one in Palawan. If the
Philippines, through the JMSU arrangement, can gather enough geologic evidence
that its continental shelf extends to the Spratlys, then it would have a firmer
claim on the territory.

Roque says that the UN Commission on the Limits of the Continental Shelf
(UN-CLCS) anyway is not going to act on any submission if it covers a disputed
territory. If the JMSU agreement can lead to an amicable settlement of the
dispute, then the UN can take up the Philippine case.

Geologist Mario Aurelio of the Mines and Geosciences Bureau represents the
Department of Environment and Natural Resources in the informal technical
working group that's putting together the Philippines' evidence for the claim on
the extended continental shelf. He says that a considerable portion of the
evidence that the UN-CLCS requires can be collected through the seismic survey
being conducted under the tripartite agreement.

Two long-time exploration geologists, who work for different companies, caution.
"The JMSU arrangement may be good for science, but it could be used by PNOC's
partners in a way that could hurt the Philippines politically and commercially
in the future," one of them says. "With the JMSU, the Philippines effectively
acknowledged that it's disputed, that it's not ours...and we might not be able
to explore and exploit the area alone from now on."

This sentiment is shared by some in government. The latest Geophysical Survey
and Exploration Contract (GSEC 101) in the Spratlys was awarded by the DOE to
Forum Energy, a UK-listed company. The contract was extended before the signing
of the tripartite agreement and is still in effect. The awarding of the
contract, a unilateral action by the Philippine government, could therefore be
interpreted as a statement that the Philippines is asserting its sovereignty
over the area. But the area covered by GSEC 101 was included within the coverage
of the tripartite agreement.

In what could be a corporate strategy, Forum Energy last June named Oscar de
Venecia, brother of the House Speaker and himself an oil industry veteran, as
board director. Meanwhile, his son, Oscar Jr., is president of Forum Energy
Philippines Corp., the local arm of the UK firm.

'Resolve Territorial Dispute First'

But what happens if the three national oil companies confirm the presence of
petroleum deposits in the area? The tripartite agreement is silent on this.
Mañalac acknowledges that when the time for drilling comes, the issue has to be
settled: "Under whose laws and then under whose contracts are we going to drill?
Then issue of ownership and sovereignty will have to come in."

The governments should then "sit together and formulate the model contract that
they will offer these oil companies."

He says that China and Vietnam are amenable to dividing equally into three the
resources that will be harnessed for this. "The problem is with the
Philippines," he says, because its Constitution provides that only companies
that are at least 60 percent Filipino-owned can exploit natural resources. The
Arroyo government is moving to amend the Constitution to relax the 60-40 rule.

But Emmers says that the "reverse" strategy might not work, citing the
experiences of other countries. "Territorial disputes," he says, should be
resolved first before the exploration and exploitation of living and non-living
resources can start."

-with reports from Isagani de Castro Jr. and Mia Gonzalez


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