Manila's Philex finds more gas in South China Sea; may fuel China tension

Reuters News
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Posted: Apr 24, 2012 4:25 AM
Manila's Philex finds more gas in South China Sea; may fuel China tension

By Erik dela Cruz and Manuel Mogato

MANILA (Reuters) - A natural gas discovery in a disputed area in the South China Sea contains more reserves than initially thought, a Philippine exploration firm said on Tuesday, with the new findings likely to further intensify territorial tensions between Beijing and Manila.

The Philippines' Philex Petroleum Corp said in a disclosure to the stock exchange that its Forum Energy Plc has a report that "is expected to show an improvement in the resources previously known" in the Sampaguita gas discovery in the Reed Bank, which the government calls Recto Bank.

Forum Energy had previously said that based on a 2006 study, the Sampaguita field had a potential of up to 20 trillion cubic feet of natural gas, or more than five times initial estimates.

It was in the Reed Bank where Chinese navy vessels threatened to ram a survey ship hired by Philex in March last year, sparking tensions that almost halted Forum Energy's work in the area. But Philippine military officials advised the firm then to continue with their job.

Philippine and Chinese ships remain locked in a standoff near the Scarborough Shoal in another part of the South China Sea for the third week running.

The Philippines insists the Reed Bank is well within its territory and not part of the disputed Spratly Islands in the South China Sea, believed to be rich in oil and gas and is crossed by important shipping lanes.

China claims ownership of the entire South China Sea, including the Spratlys which is claimed in whole by Taiwan and Vietnam and in part by Malaysia, Brunei, and the Philippines.

Apart from the Sampaguita gas field, 15 other oil and gas exploration sites near the South China Sea are up for grabs, with the government expected to award exploration contracts in July as it seeks to reduce its reliance on oil imports, a senior energy company official said on Tuesday.

Two of those 15 exploration sites are in areas being contested by China.

Energy Secretary Jose Rene Almendras said he was waiting for an official report from Forum Energy, but its findings could greatly lessen the dependence on imported fossil fuel.

"Reading the statements, I cannot help but smile and be happy because if it's true and it's big, then hopefully the resources will help us face the need for energy in the future," Almendras said in an interview with local TV network ANC.

Almendras said the Sampaguita gas discovery would support plans to build a multi-billion-peso pipeline that would bring the natural gas to industrial users in Manila.

The Sampaguita gas field is near the Malampaya gas field, with about 2.7 trillion cubic feet of natural gas, and which supplies fuel to three power plants for the main Luzon island.

Forum Energy has a 70 percent interest in the Sampaguita gas discovery in the Reed Bank after it bagged an exploration contract issued by the Philippines' Energy department in 2010.

Philex Petroleum, a unit of the Philippines' top gold miner Philex Mining Corp, has a 65 percent controlling interest in Forum.

STANDOFF

The stand-off between Philippine and Chinese ships near Scarborough Shoal is raising worries over what some see as growing Chinese assertiveness in staking claims over the sea's islands, reefs and shoals.

Lieutenant-General Anthony Alcantara, commander of military forces in northern Luzon, including Scarborough Shoal, said a Philippine coast guard ship would stay put in the area to assert the country's sovereignty and protect Filipino fishermen.

Alcantara said the situation in the shoal was "stable", with navy ships prepositioned nearby to monitor the standoff and a surveillance plane patrolling the area.

China still has one maritime inspection vessel in the area after it withdrew two civilian ships this week, Zhuang Hua, spokesman of the Chinese embassy in Manila, said on Monday, stressing that Beijing was working to ease tensions in the area.

In recent days, the People's Liberation Army (PLA) of China warned that friction with the Philippines could escalate into armed conflict unless the United States helps rein in Manila. Retired senior PLA officers also urged Beijing to take a tougher line in asserting South China Sea claims.

Those threats do not amount to definitive government policy, but they underscore domestic pressures on Beijing to take a stronger position against the Philippines and other claimants.

(Editing by Rosemarie Francisco and Michael Perry)