March 1, 2018 / 2:09 AM / 3 months ago

Philippines says any South China Sea energy deal must be with Chinese company, not government

MANILA (Reuters) - Any potential deals between Manila and Beijing on energy exploration in the South China Sea should be agreed with a company and not the Chinese government, a senior Philippine official said on Thursday.

File photo: National flags are placed outside a room where Philippine Finance Secretary Carlos Dominguez and China's Commerce Minister Gao Hucheng address reporters after their meeting in Beijing, China, January 23, 2017. REUTERS/Damir Sagolj

China claims most of the South China Sea, a key trade route and home to areas that are believed to hold large quantities of oil and natural gas. Along with China, parts of the South China Sea are subject to competing claims from Brunei, Malaysia, Taiwan, Vietnam and the Philippines.

“We might enter into an agreement with a Chinese-owned corporation, not the Chinese state itself,” Harry Roque, the spokesman for President Rodrigo Duterte, told ANC news channel.

The two countries last month agreed to set up a special panel to work out how they can jointly explore offshore oil and gas in areas both sides claim, without needing to address the touchy issue of sovereignty.

Pursuing a joint project would be extremely complex and sensitive, as sharing oil and gas reserves could be seen as endorsing the other countries’ claims.

“We are not entering into a sovereign agreement for exploration. It will be an agreement, if we do, between two corporate entities,” Roque said.

Duterte said late Wednesday that China had proposed joint exploration that was “like co-ownership” and better than the two fighting over it.

Roque on Thursday stressed during a news briefing that the issue was about joint exploration and exploitation as a practical solution for the Philippines to access resources without conflicts over sovereignty.

He said Duterte was using co-ownership as an analogy to try to simplify the issue.

The Philippines suspended exploration in the Reed Bank in 2014 to pursue a legal challenge to China’s territorial claims.

Included in a 2016 ruling by the Permanent Court of Arbitration in the Hague was a clarification of Manila’s sovereign right to access offshore oil and gas fields, including the Reed Bank, within its 200 mile Exclusive Economic Zone.

Negotiations are ongoing with a Chinese state-owned company, Roque said, declining to name the entity.

The Philippines, China’s CNOOC Ltd and state-owned PetroVietnam jointly surveyed the Reed Bank in 2003 to 2008.

Roque said, however, there were some doubts that a joint agreement would work because China did not favor joint activities.

The Philippines’ ties with China have warmed under Duterte, who has put aside territorial disputes in exchange for trade opportunities and pledged financing for infrastructure projects.

Reporting by Neil Jerome Morales; Editing by Martin Petty and Christian Schmollinger

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