Newfound Philippines-China ties face acid test with Reed Bank drilling? Experts weigh in

Newfound Philippines-China ties face acid test with Reed Bank drilling Experts weigh in

The Philippines under the Duterte Administration is reportedly bent on reopening the Reed Bank for possible natural energy sources.

This early, however, analysts are saying that this intention put the Philippines in an uncomfortable situation with China.

“You had Duterte saying he spoke to (Chinese President) Xi Jinping in May and China threatened to take action if they started drilling,” Carl Thayer, a professor specializing in Southeast Asia relations at the University of New South Wales in Australia, said.

“It’s a sensitive time. July 12 was the anniversary of the arbitral tribunal decision,” he added.

Thayer is referring to the United Nations Arbitral Tribunal in The Hague last year, which saw the court unanimously ruled the disputed West Philippine Sea within Philippine territory despite China’s alleged ‘stronger’ claims. The latter refused to honor this favorable decision and still insisted sovereignty over the contested island.

Reopening Reed Bank

The Philippines’ Department of Energy’s Resource Development Bureau is settling contract offers on oil and natural gas prospects at the Reed Bank for a better crude oil price environment, where economic developments are temporarily suspended under Service Contract 72 of December 2014 due to the conflict between the Philippines and China on the West Philippine Sea.

However, Director Ismael Ocampo, said this month he expects the ban to be lifted by December, in which the government agency still has to consult with the Department of Foreign Affairs in Manila.

“Probably Mr. Ocampo’s statement is a way that Manila has to test China’s resolve or restraint or even to elicit some cooperative stance from China without risking to irritate or antagonize Beijing,” political analyst Fabrizio Bozzato of Taiwan Strategy Research Association said.

He also cited that this action might result in China withholding its promised $24 billion investment for the Philippines in October, which could devastate Duterte’s economic ambition.

If this proceeds, observers are saying China would push the country back to the US, to which Duterte has resisted its aid in his first year in office so far.

Duterte’s EO 30

Currently, the government is spearheading a new economic stand in strengthening the Philippines’ energy industry, in which taking full advantage of its oil and natural gas resources enters Duterte’s vision.

Initial efforts in shedding light to the country’s rich energy sources are already being realized under the Executive Order (EO) 30, which ties power investors to coordinate with local power producers.

In an interview with US cable network CNBC, Energy Secretary Alfonso Cusi said that the country is adopting a balance in the country’s energy mix to add to its immediate materials like coal, oil, and natural gas; other sources such as geothermal, hydro, solar and wind.

Additionally, the most notable feature in the bill is the new approval system of incoming power investments, which was changed from three years to a 30-day time frame.

“The shift was meant to hasten the expansion of the nation’s power capacity to meet growing demand,” Cusi said.

Duterte signed the enactment last June 28.

Photo courtesy of Philippine Star