PH gets 4 bids for disputed South China Sea oil, gas blocks

By Erik dela Cruz, Reuters

Posted at Jul 31 2012 06:58 PM | Updated as of Aug 01 2012 07:12 PM

MANILA - The Philippines accepted on Tuesday four bids for three oil and gas exploration blocks in the South China Sea, including two prospects in waters claimed by China, a weak turnout for the last phase of the country's biggest petroleum exploration tender.

Only six firms showed up for the bidding out of the 38 domestic and foreign firms prequalified early this year. In all, 20 firms, most of them domestic, participated in the auction of rights to explore 15 sites around the Southeast Asian country.

Energy officials were quick to play down the South China Sea territorial dispute as a reason for the poor turnout.

"We don't think the tension in the West Philippine Sea area had a negative impact on our efforts," Energy Undersecretary Jose Layug told reporters.

Foreign exploration firms that were prequalified, including Nido Petroleum Ltd of Australia, Spanish energy company Repsol, French gas and power firm GDF Suez, Italy's Eni, and Shell Philippines Exploration BV did not show up.

"As to the reason why the big players did not submit a bid, we are not aware of that. Presumably, among other factors, it's perhaps their own appreciation of the data that is available," Layug said.

"Depending on their own assessment of the data, that's when they consider submitting a bid. We're very happy with the turnout," he said.

The Department of Energy auctioned rights to explore on areas 3, 4 and 5, with the first two near the Reed Bank in the South China Sea. The contracts are for the last of 15 sites it tendered this year.

It accepted the sole bid for area 3 from unlisted domestic firm Helios Petroleum and Gas Corp.

"The number of prequalification is not meaningful. Most prequalifiers register to get data from the Department of Energy for future reference," Vincent Perez, a former Philippine energy minister, told Reuters.

Helios also submitted a bid for area 4 along with a consortium composed of state-owned PNOC Exploration Corp , Philex Petroleum Corp and PetroEnergy Resources Corp.

Also accepted was the sole bid for Area 5 off the southwestern Palawan province from the group of The Philodrill Corp and Pitkin Petroleum Ltd, which is partly owned by Philex Petroleum.


China claims almost the entire South China Sea while the Philippines, Vietnam, Taiwan, Brunei and Malaysia also claim parts of it.

Layug said the three areas were the "most prospective" of the 15 exploration blocks offered this year to investors.

The three sites off the southwestern island province of Palawan are near the Malampaya and Sampaguita natural gas discoveries. Malampaya is the country's biggest source of natural gas.

Owned by a consortium led by Shell Philippines Exploration B.V., a unit of Royal Dutch Shell Plc, Malampaya produces more than 2,700 megawatts, or 30 percent of the power requirements of the main Luzon island.

On the other hand, Sampaguita, a discovery of London-listed Forum Energy Plc and majority owned by Philex Petroleum, was at the scene of an incident last year in which Chinese navy ships threatened to ram a Philex survey ship, sparking renewed tension between the Philippines and China.

Philex has said it had discussed a possible tie-up with Chinese offshore oil producer CNOOC in Sampaguita, although no agreement has been reached.

"Insofar as we're concerned, we are a Philippine company and we will abide by Philippine laws," Philex Chairman Manuel Pangilinan told reporters on Monday.

A partnership between Philex and CNOOC on the Sampaguita project, which was 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.

The dispute could become Asia's biggest military flashpoint as China's sovereignty claim has set it against Vietnam and the Philippines, with the three countries racing to tap possibly huge oil reserves.

"All the areas we have offered are well within the 200 nautical mile exclusive economic zone of the Philippines under the UNCLOS (United Nations Convention of the Law of the Seas)," Layug told Reuters on Monday.

"Thus, the Philippines exercises exclusive sovereign rights and authority to explore and exploit resources within these areas to the exclusion of other countries. There is no doubt and dispute about such rights."

Energy Secretary Jose Rene Almendras said last week the first of 15 service contracts would be awarded "within the next 60 days".

"As far as we're concerned, we are bidding something within the Republic of the Philippines so we have the right to do that," he said.