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Offshore Oil and Gas Cooperation Between China and the Philippines

Oct 29, 2018
  • Luo Liang

    Assistant Research Fellow, National Institute for South China Sea Studies


The third meeting of the China-Philippines Bilateral Consultation Mechanism on the South China Sea was held in Beijing on October 18. Chinese Vice Foreign Minister Kong Xuanyou and Philippines Foreign Affairs Undersecretary Enrique Manalo led their respective delegations representing departments including national defense, natural resources, the environment, fisheries, transportation, energy, and maritime police. The two sides exchanged views on the current situation in the South China Sea and their respective concerns. A topic of particular interest was cooperation on jointly exploring and developing offshore oil and gas, on the basis of not prejudicing each other’s sovereignty, sovereign rights, and jurisdiction.

History of Joint Exploration and Development of Oil and Gas in the South China Sea

Since the 1980s, the Chinese government has advocated “shelving differences and seeking joint development” through negotiation, management, and resolution of disputes concerning the South China Sea. An area of intense focus has been the joint development of oil and gas resources in the area. In September 2004, China National Offshore Oil Corporation (CNOOC) and Philippines National Oil Company (PNOC) signed an agreement to carry out joint maritime seismic work. Later, China and the Philippines agreed that Vietnam could join, and the national oil companies of the three countries signed A Tripartite Agreement for Joint Marine Scientific Research in Certain Areas in the South China Sea in March 2005. The Agreement stipulated their intention to evaluate the status of oil resources in 143,000 km2 of the South China Sea over the following three years. The Agreement has been hailed as a model for the joint development of oil and gas resources in the region. It was also stated in a Joint Statement of the People’s Republic of China and the Republic of the Philippines in 2007 that, “possible next steps for cooperation among the three parties should be explored to bring collaboration to a higher level and increase the momentum of trust and confidence in the region.” It is regrettable, however, that this experiment in tripartite cooperation on oil and gas exploration in the South China Sea did not continue after this initial progress.

Stalled Cooperation with Brunei

On April 5, 2013, the Sultan of Brunei Haji Hassanal Bolkiah visited China. The subsequent Joint Statement issued by the countries lent support to relevant enterprises from both countries engaging in joint exploration of offshore oil and gas based on the principles of mutual respect, equality and mutual benefit. The Sultan also visited CNOOC during his time in China. On October 11 of the same year, Chinese Premier Li Keqiang visited Brunei. The Joint Statement issued by the two countries during the visit expressed agreement on CNOOC and Brunei National Petroleum Company establishing a joint venture energy company. In May 2014, cooperation between China and Brunei in the area of oil and gas officially began with the completion of company registration procedures for Brunei China Oilfield Services Joint Venture Co., Ltd. The company was jointly funded by China Oilfield Services Limited (COSL) and Brunei National Petroleum Services Company. It was COSL’s first overseas investment company, with plans to build six new platforms in Brunei’s Champion oilfield, including four wellhead platforms, a drilling platform and a natural gas compression platform. In the four years since the company was established, there has been no substantial progress or obvious breakthroughs in offshore oil and gas cooperation between China and Brunei. There are likely two main reasons for this: first, there has been a downturn in international oil prices, so oil and gas companies are less willing to engage in joint development, and second, Brunei has been looking for ways to diversify and break its economic dependency on energy, so with the replacement of senior officials in the energy sector, some initiatives have been shelved.

Prospects for Offshore Oil and Gas Exploration and Development Cooperation Between China and the Philippines

Since President Rodrigo Duterte took office, a historic change has taken place in Sino-Philippine relations, as they moved on to a healthier development track. On August 29, one of the Philippine Navy’s largest ships ran aground at the Half Moon Shoal on the edge of the Spratly Islands, but the matter was quickly resolved. The incident has not affected overall friendship and cooperation between China and the Philippines. This not only reflects the high levels of mutual political trust between the two nations, but also shows that both sides have the wisdom and ability to cope with and control such a crisis. It also shows their ongoing commitment to maintaining peace and stability in the South China Sea.

The China-Philippines Bilateral Consultation Mechanism on the South China Sea set up in May 2017 established important institutional arrangements for China and the Philippines to manage differences of opinion and joint development. Joint development of the South China Sea by China and the Philippines has always been an ardent wish of both sides and it is in both their best interests. With Sino-Philippine relations experiencing steady and healthy development, the third meeting of the Bilateral Consultation Mechanism went well and helped ease the way for joint exploration and development of offshore oil and gas in the region. According to the Philippine’s World News, Chinese President Xi Jinping will pay a state visit to the Philippines in November. In accordance with established practices, the two sides will sign a series of cooperation agreements on the outcomes of the visit, and it is expected that an agreement on jointly exploring and developing offshore oil and gas will be signed.

In addition, in accordance with ASEAN rules, the Philippines has succeeded Singapore as the country coordinator of ASEAN-China Dialogue Relations from 2018 to 2021. In this period of continuous improvement in Sino-Philippine relations, having the Philippines serve as the country coordinator should further promote full and effective implementation of the Declaration on the Conduct of Parties in the South China Sea (DOC) and create a positive atmosphere and political environment for advancing the Code of Conduct in the South China Sea (COC). Sino-Philippine relations are in their best shape in many years, which benefits both countries and their peoples. It also accords with the trends of the times and the common aspirations of all countries in the region.

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