Complications Surrounding Philippine-Chinese Joint Oil and Gas Exploration in the West Philippine Sea

PSA Intelligence finds it unlikely for a joint oil and gas exploration agreement in the West Philippine Sea (WPS) to push through in the short term between China and the Philippines due to the complications of this agreement and the contested territorial claims of both countries. To date, there is no publicly announced proposal for energy exploration, particularly in the Reed Bank, from either Philippine or Chinese officials. All discussions on the matter have been speculative but have gained significant public attention due to rising fuel prices and the uncertainty of fuel shipments to the Philippines from the Middle East.

How the Discussions for Joint Oil and Gas Exploration Started

Interest over possible joint oil and gas explorations in the WPS with Beijing was renewed following a recent interview where President Ferdinand Marcos Jr. expressed openness to the idea and stated that “everything that might be of help, we are certainly pursuing.” At present, discussions on possible joint exploration efforts have not explicitly centered on a particular WPS territorial feature, but PSA Intelligence notes that Reed (Recto) Bank has been found to have potential natural gas and oil reserves.

The discussion has since reached the Senate, where lawmakers have expressed differing opinions on the matter. Senate President Vicente Sotto III and Senate President Pro Tempore Panfilo Lacson both expressed their support for joint exploration efforts, while others like Senator Win Gatchalian suggested other Asian partners for exploration. Senator Juan Victor “JV” Ejercito cautioned against partnering with China due to its coercive actions against the Philippines in the WPS. Meanwhile, a group of retired Filipino diplomats reportedly proposed a corporate structure governing drilling in the Reed Bank, with 60 percent of voting shares held by a Philippine entity and 40 percent held by a Chinese partner.

PSA Intelligence notes that no formal technical proposal from either Philippine or Chinese officials has been made on joint oil and gas exploration under the current Marcos administration. Past efforts were undertaken during the Arroyo and Duterte administrations, but were either shelved or deemed unconstitutional. In 2005, the Philippines entered a tripartite agreement for Joint Marine Seismic Undertaking (JMSU) with China and Vietnam, which was declared unconstitutional by the Supreme Court in 2023. Negotiations to resume joint explorations with China restarted in 2018 following a memorandum of understanding (MOU), but the Philippines formally pulled out of joint exploration talks and stopped all related activities in June 2022.

The Complicated Case of Joint Exploration with China

Previous proposals for a Philippine-Chinese joint oil and gas exploration have all failed to progress due to conflicting territorial claims over the area and a perceived lack of trust between the two parties. Both Philippine and Chinese governments disagree on whose legal framework should be used for exploration operations, as deciding one over the other would be tantamount to relinquishing their territorial claims in the area. 

China has also historically deviated from its agreements with other Asian countries. There are records of Chinese harassment against Malaysian and Vietnamese oil and gas vessels in their respective waters, despite the existence of joint venture or exploration initiatives with China. 

PSA Intelligence notes that major operational risks may emerge from a vaguely defined joint development agreement between the Philippines and China that is not fully governed by Philippine laws. There is a risk that Chinese vessels may take the oil harvested either by intimidation or entirely by force should China unilaterally control drilling efforts and the technical aspects of the exploration proper. This scenario is not entirely different from current Chinese aggression in the WPS, which has informed the Armed Forces of the Philippines’ (AFP) reservations over partnering with China.

As of writing, no clear actions that formally discuss or negotiate terms on joint exploration between the Philippines and China have been taken. Recent diplomatic consultations between the two countries have focused on general economic cooperation, law enforcement, and people-to-people ties.