The PH-China Memorandum of Understanding on Cooperation on Oil and Gas Development, considered a breakthrough in the jagged relationship of the Philippines and China, is expected to move forward when the two governments submit the names who will compose the Working Group during the bilateral meeting of President Duterte and Chinese President Xi Jinping in China on Thursday.
The exchange of names of members of the Working Group is provided for in the Terms of Reference (TOR) on Inter-Governmental Joint Steering Committee and Inter-Entrepreneurial Working Group between the Philippines and China which was signed by Foreign Secretary Teodoro Locsin Jr. and China’s Foreign Minister Wang Yi three weeks ago.
The Working group will negotiate and agree on” inter-entrepreneurial commercial and technical arrangements” that will be conducted in thearea of the joint exploration that will be undertaken jointly by the Philippines and China in Philippine waters.
The TOR, which is an implementing guideline to the MOU which was also signed by Locsin and Wang last November during Xi’s Manila visit, does not specify a specific area covered or a specific service contractor but it is the understanding of many that the joint exploration will be in the natural gas-rich Recto Bank (international name is Reed Bank; Chinese name is Liyue Tan) in Palawan, within the 200 nautical mile exclusive economic zone of the Philippines.
It is also in that area that the fishing boat Gimver1 manned by Filipinos was rammed by a Chinese vessel last June.
Senior Associate Justice Antonio T. Carpio gave credence to this understanding in his talk at the Democracy and Disinformation conference in Davao City Aug. 23.
He said: “In that MOU, China agreed to invest in Philippine service contractor or to be a subcontractor of a Philippine service contractor and get 40 percent of the revenue, we get 60 percent. In other words, China will become a subcontractor of our contractor. Our service contractor is Forum Energy.”
Forum Energy Plc. (FEP) won Service Contract 72 in 2010 during the administration of President Benigno Aquino III to explore within Reed Bank. Philex Petroleum Corp, a mining company headed by Manuel V. Pangilinan, owns majority shares of FEP.
Forum Energy had started the exploration in 2010 but stopped after Chinese vessels harassed their ships. A moratorium on the exploration in Reed Bank was also imposed by the Philippine government when the Aquino government filed a case before the Permanent Arbitration Court in The Hague. The moratorium remains unlifted up to now.
The Arbitral Court ruled that Recto Bank is within the Philippines EEZ.
A significant provision in the MOU says:“China authorizes China National Oil Corporation (CNOOC) to be the Chinese enterprise for each Working Group. The Philippines will authorize the enterprise (s) that has/ have entered into a service contract with the Philippines with respect to the applicable working area or, if there is no such enterprise for a particular working area, the Philippine National Oil Company –Exploration Corporation (PNOC-EC) as the Philippine enterprise(s) for the relevant working group.”
Carpio said all Service Contracts of the Department of Energy states that state that the Philippines has exclusive sovereign rights over the gas/oil in the area awarded to the service contractor.
“The service contractor acknowledges that we own the resources,” Carpio stressed.
With the signing of the MOU and the TOR, Carpio said it is now an implied admission that the Philippines has exclusive sovereign rights to the area awarded. “So if China thru CNOOC buys equity in the service contractor, or becomes a sub-contractor of our service contractor, then China impliedly accepts the Philippineshas exclusive sovereign rights over the area of the service contractor,” Carpio said in an interview with VERA Files.
Carpio said in the Davao conference that with the MOU and TOR, “We have now two documents and I think the President will go to Beijing and there could be an exchange of a list of names who will be members of the steering committee and the working committee.”
The Committee will be meeting every three months. If agreed by both sides, a back-to-back meeting may be held together with the meeting of the Philippines-China Bilateral Consultation Mechanism of the South China Sea.
Carpio underscored the importance of the documents signed: “We have two documents already. I said one swallow does not make a summer. But we have now two documents, two swallows. And if there is an exchange of names, three. So we are in the summer already.”
He said he is hopeful that there will be another document which will be the name “of the Philippine Enterprise for the Working Group” and the names that will compose the Working Group.
Carpio said he talked with the Vietnamese, who also have conflicting claims with China in South China Sea. “They said under that formula, we’re willing to sign also with the Chinese. And I believe the Malaysians also are willing to sign, and also the Indonesians,” said the senior justice who will soon be retiring in October.
Carpio, who has been a target of insults by Duterte, said, “The President of course doesn’t like me but, I am for him now because of this. Because despite everything, he might be the president who will find a solution to the SCS dispute.”