MANILA - The Philippines' Philex Petroleum Corp said on Tuesday it has discussed a possible partnership with Chinese offshore oil producer CNOOC to develop a natural gas prospect in the disputed South China Sea, a deal that may help ease tension between the two sides.
China meanwhile warned the Philippines that confrontation over an island in the South China Sea could worsen and Beijing has made "every preparation" to counter what it called potential expansion of the conflict by Manila.
Philex would need a major foreign partner to develop its Sampaguita project, or "service contract 72", estimated to cost billions of dollars, chairman Manuel Pangilinan told reporters.
"I received an official invitation from CNOOC. I was in Beijing last week and we discussed SC 72," he said, referring to the exploration permit issued by the Philippines' Department of Energy covering the Sampaguita gas discovery in the Reed Bank in the disputed waters.
"Whether it's the Chinese that we will eventually partner with or the non-Chinese, I think it is necessary for us to partner with an international oil major who have the expertise and the money," he said.
"(Sampaguita) will take six to 10 years to develop, that's why it's important for us to start now."
It was in the Reed Bank where Chinese navy vessels tried to ram one of the survey ships of Forum Energy, a unit of Philex, almost halting its research work last year.
Pangilinan declined to give more details on the talks with CNOOC, or China National Offshore Oil Corp, saying he was not at liberty to do so.
"Any discussions with them at this stage is privileged," he said, adding the Philippine government was aware of the talks.
A partnership between Philex and CNOOC on the Sampaguita project, which is estimated in a 2006 study to hold up to 20 trillion cubic feet of natural gas or more than five times initial estimates, may help defuse tension.
China has territorial disputes with the Philippines, Vietnam, Brunei, Malaysia and Taiwan across the South China Sea.
A Philippine coast guard ship and two Chinese maritime surveillance vessels faced off near the Scarborough Shoal in waters believed to be rich in oil and gas in early April after what China said was harassment of Chinese fishing boats.
Chinese Vice Foreign Minister Fu Ying summoned the Charge D'affaires at the Philippine Embassy Alex Chua on Monday to complain for the third time in less than a month over a continuing standoff.
"The Philippines clearly has not recognised that it is making a serious mistake," Fu said, adding it was "difficult to be optimistic" about the dispute.
"We hope the Philippines will not misjudge the situation and not escalate tensions without considering the consequences," she said in a statement posted to the ministry's website (www.mfa.gov.cn) on Tuesday.
"China has also made every preparation to respond to the Philippines' intensification of the situation," Fu said.
Philippine Foreign Affairs Secretary Albert del Rosario reiterated the rules-based approach in the U.N. Convention on the Law of the Sea (UNCLOS), which Manila signed in 1984, was the way forward in addressing the disputes.
"UNCLOS has never been more important for the Philippines than today, when overlapping maritime claims threaten as never before the peace and prosperity in our part of the world," he said in a statement.
The disputes are pushing the Philippines to seek closer cooperation with its chief ally the United States, drawing Chinese condemnation.