Philippines weighs China energy deal in disputed South China Sea

[MANILA] The Philippines is considering potential ways to jointly develop oil and gas resources with China in a disputed part of the South China Sea, according to Foreign Affairs Secretary Alan Peter Cayetano.

Any joint ventures would conform to Philippine law and wouldn't lead to the loss of Philippine territory, Mr Cayetano told a House of Representatives hearing on Tuesday in Manila. Shortly afterward, he sought a closed-door meeting with legislators, citing national security.

"If we can come up with a commercial deal better than Malampaya in the disputed areas, how can any Filipino argue with that?" Mr Cayetano said. He was referring to the country's largest gas field, which is set to run out of supply in 2024.

The remarks are the latest indication of warmer ties between the Philippines and China after years of tension under the prior administration of Benigno Aquino. Since taking power last year, President Rodrigo Duterte has sought closer investment and trade links with Beijing, including over resources in the South China Sea.

Mr Aquino brought China before an international arbitration tribunal over its claims to 80 per cent of one of the world's most strategic waterways, and won. He also strengthened the Philippine alliance with the US to try to check China's expansion in the South China Sea, where it has built a series of artificial reefs, creating a platform to assert its claims.

Mr Duterte isn't ignoring the arbitration award, and will bring it up at a later time as the Philippines builds mutual trust with China, Mr Cayetano said.

"There was no opportunity to talk to China because we had consistent confrontations with them," he said. "We won the legal part, but on the ground we were going nowhere."

Last month, Chinese Foreign Minister Wang Yi backed the idea of joint energy ventures with the Philippines in disputed waters, saying it was "full of political wisdom." Unilateral development could lead to tensions and hurt both countries, Mr Wang told reporters during a visit to Manila.

Any deal may also impact Vietnam, which rejects China's expansive sea claims as a basis for jointly developing energy resources. The BBC reported last month that Vietnam had ordered Repsol SA, a Madrid-based oil-and-gas company, to halt activities in the South China Sea after China threatened to attack Vietnamese bases in the Spratly Islands.

BLOOMBERG