The Market Monitor Minding the Nation's Business
By DIEGO C. CAGAHASTIAN
Two days before the United States and Israel released the first missiles that assassinated Iran’s supreme leader Ayatollah Ali Khameini, his top generals and family members, along with some 170 schoolgirls in an elementary school in Tehran, Filipino businessman Manny V. Pangilinan gave an interview with Bloomberg about oil and gas exploration in the disputed South China Sea.
In this interview, Pangilinan who is chairman of PXP Energy Corp., first broached the possibility of partnering with China in the exploration of oil and gas in certain areas of the South China Sea (SCS).
These places are where both China and the Philippines have competing territorial claims.
Little did Manny know that indeed, his idea of partnering with the Chinese in the oil development of the Reed Bank in the South China Sea—which he officially pitched to Malacañang—would finally be considered by President Ferdinand Marcos Jr. himself three weeks after he talked with Bloomberg.
What happened in between was the Feb. 28 coordinated attack by Israel and the US on the key cities of Tehran and Minab in Iran, the quick spread of hostilities in the whole Gulf region, the closure of the Strait of Hormuz, and the concomitant squeezing of vital oil in countries around the world, including the Philippines.
“My personal view is we should engage China,” PXP Energy Corp. Chairman Manuel V. Pangilinan told reporters. “Look at what Mark Carney did for Canada.”
The PXP chairman referred here to Canadian Prime Minister Mark Carney’s energy policy involving China. Before Bongbong Marcos even thought of resetting the Philippines’ relations with China, Carney initiated in January, 2026 a “new strategic partnership” with Beijing, aiming to reset bilateral relations. This move included engaging in energy trade, such as conventional oil and natural gas. This marked a shift in approach, focusing on pragmatic engagement and the diversification of Canadian trade.
Complicated business
According to Manny Pangilinan, the activity of looking for oil and developing the offshore well “is a very complicated business.”
He told Bloomberg that his company, PXP Energy, “needs the expertise and capital if it were to proceed with the development of the Reed Bank. The company had estimated in 2014 that it would cost $6 billion to develop it, which PXP can’t afford.”
Pangilinan noted that an expert partner is needed for the exploration work in the Reed Bank of the SCS to move forward, and this partner can be China or somebody else. Then again, the turbulent, conflicting sovereignty and territorial claims in the area have surfaced from time to time.
Indeed, the matter of energy exploration in the resource-rich SCS is for the two governments to resolve.
The Chinese embassy has released its position on the matter: “Setting aside differences and pursuing joint development is the right path to uphold peace and stability in the South China Sea and deliver benefits to countries in the region and their peoples.”
It noted that China and the Philippines have conducted in-depth discussions on joint oil and gas development in the SCS and have made “positive progress.”
“As long as the Philippine side demonstrates sincerity, China’s door to dialogue and cooperation will remain open,” the embassy said.
Pangilinan said he last met with representatives of state-owned China National Offshore Oil Co. in 2019, when the administration of former Philippine President Rodrigo Duterte pushed for joint oil and gas development in the South China Sea amid a broader effort to forge closer economic ties.
Teddyboy ends all talks
It was former foreign affairs secretary Teodoro Locsin Jr. who announced in June 2022 that the Philippines had completely terminated the discussions on joint energy exploration between Manila and Beijing, citing constitutional constraints and sovereignty issues.
In his speech at the Department of Foreign Affairs (DFA) Foundation Day in 2022, Locsin said both sides tried to negotiate for three years and got as far as constitutionally possible. However, another step forward would have risked a “constitutional crisis”.
“That explains the sudden pull-back on my part which unraveled three years of sincere hard work on the part of Wang Yi and me. We had both tried to go as far as we could — without renouncing China’s aspiration on his part; and constitutional limitations on my part. I shut down shop completely,” he said.
“The President had spoken. I carried out his instructions to the letter: oil and gas discussions are terminated completely. Nothing is pending; everything is over,” he added.
He noted that throughout the three-year talks, the Philippines never surrendered even a particle of its sovereignty.
The top diplomat said it now falls on the next administration’s shoulders to protect the Philippine sovereignty “all the way to the wire”.
“The irreducible template of what is constitutionally possible is there in black and white. Surrender of any portion of Philippine sovereignty is not an option,” Locsin said.
Ado Paglinawan clears the air
But for journalist and former diplomat Ado Paglinawan, this is not the end of it all.
Ado criticized Teddyboy for his failure to do his job, because he saw Locsin’s official action during the waning days of the Duterte administration as “stonewalling on sovereignty.”
Paglinawan clears the air as he wrote:
“’Kung gusto, may paraan. Kung ayaw, maraming dahilan.’
What sabotaged the deal was Locsin’s lawyering. The present Constitution (internal law) will never allow a Service Contract with the Philippine-side having less than 60% ownership. It is therefore impossible to proceed with this within the legal box.
1) But besides the law, what has begged the question here is that oligarchic interests have-loaded the issue. Despite the fact that Reed Bank is outside of our 12-nautical mile territorial sea, fifth columns in our society insist that we have ‘sovereign rights’ over it because it is within our 200 nautical mile ‘exclusive’ economic zone.
The leader influencer of this serious fallacy is expired Asso Justice Antonio Carpio who has championed the false theory that because the language of UNCLOS so provides this 200 nm maritime delimitation, the entitlement is ‘automatic’, oblivious that the same treaty provides a caveat in its Article 74 in case of a dispute by other coastal states.
That Article neutralizes the ‘automaticity’ and ‘exclusivity’ of EEZ entitlements, and estoppes parties from enforcing until all involved parties resolve their differences peacefully under the wisdom of UNCLOS in Articles 74 and 75.
2) In fact, China will undertake the whole project footing 100% of feasibility studies, engineering and technical works, funding and actual construction, but offers 60% of proceeds to the Filipinos with the Philippines spending nothing. This is much more beneficial to our interest but the mathematics of our Constitution does not compute.
This is where the diplomats come in — making what is internally illegal, work for the best interests of the Filipino people, which is to get the job done.
The solution is supra-constitutional by enabling a 100% Philippine ownership of its share of the project through a government-to-government (G to G) deal enforced through a treaty or under international law.
If a country smaller than us like Timor-Leste did it with not just one but two countries, Australia and Indonesia, entering into a Sea Treaty, why can’t we?
Even our own Constitution says our internal laws must harmonize with international law.”
Let us just hope that this time around, the oil exploration talks which were stalled for four years, will move forward with a new set of PHL negotiators. The nation needs to survive the current energy crisis.