Filipino protesters hold placards during a rally outside the Chinese consular office in Manila on July 12. The demonstration marked the fifth anniversary of the country’s victory at the Permanent Court of Arbitration in favour of the Philippines’ claims in the South China Sea. Photo: EPA-EFE
Rommel C. Banlaoi
Rommel C. Banlaoi

South China Sea: China, Philippines must renew push on oil and gas cooperation as pathway to peace

  • Progress on a 2018 agreement on joint exploration was hampered by the pandemic, but the lifting of a Philippine moratorium on such exploration should provide fresh impetus towards a mutually beneficial agreement
Though security tensions are rising in the South China Sea as a result of increased unilateral activities of claimants and other user states, peace and stability in this maritime domain can still be achieved if all stakeholders commit to lowering tensions by pursuing cooperation.
The development of natural gas and oil is one area where parties can pursue cooperation in the South China Sea, particularly five years after the release of the international arbitration decision.
The Memorandum of Understanding on Cooperation on Oil and Gas Development signed by China and the Philippines in November 2018 is an impetus for parties to cooperate to share the resources of the South China Sea.
Rather than confront each other, China and the Philippines should uphold the duty to cooperate, which is mandated by the United Nations Convention on the Law of the Sea and reaffirmed by the 2002 Declaration on the Conduct of Parties in the South China Sea and the single draft negotiating text on the Code of Conduct in the South China Sea.


Explained: the history of China’s territorial disputes

Explained: the history of China’s territorial disputes

To implement the MOU, China and the Philippines formed the Intergovernmental Joint Steering Committee on Oil and Gas Development in October 2019 during the fifth meeting of the Bilateral Consultative Mechanism in the South China Sea.

Vice-Foreign Minister Luo Zhaohui led the delegates from the Chinese steering committee while Department of Foreign Affairs Undersecretary Enrique Manalo led the Philippine team. Both steering committees also included participants from their respective energy department or ministry.

At that first meeting, China and the Philippines discussed several important concerns, including a legal framework for cooperation arrangements, scope of cooperation areas, taxation processes and dispute settlement mechanisms.

After the meeting, both parties agreed to hold the second meeting of the committee in the Philippines in early 2020.

A deep-water gas field operated by CNOOC in the waters 150km off Sanya, Hainan province, on May 12. The development of natural gas and oil In the South China Sea is one area ripe for cooperation. Photo: Xinhua
Because of the Covid-19 pandemic, China and the Philippines failed to move to the next step of their discussions.
But the first joint steering committee meeting convinced Philippine President Rodrigo Duterte in October 2020 to lift the moratorium on oil and gas exploration in areas of the South China Sea that the Philippine government calls the West Philippine Sea.

The lifting of the moratorium provides the legal justification for the Philippines to implement the MOU with China. It allows the Philippines Department of Energy to issue a notice to service contractors to resume work on petroleum-related activities in the West Philippine Sea.

There is a need for China and the Philippines to go to the next step of MOU implementation to advance their cooperation in oil and gas development. Both countries have to convene the next meeting of the joint steering committee as soon as possible.

They need to thrash out their differences on the legal and procedural issues of joint development, and find common ground to move forward in their cooperative undertakings, especially in the context of key domestic legal and bureaucratic requirements in the Philippines.

If China and the Philippines can implement the MOU in areas covered by several service contracts, it has the potential to transform the South China Sea from a looming flashpoint of armed conflict to a sea of cooperation.

Cooperation in the development of gas and oil tends to be concluded in a conducive environment where good relations exist between parties.

Duterte’s China-friendly policy, reciprocated by a similarly friendly policy of President Xi Jinping towards the Philippines, provides the needed policy environment for both countries to implement the MOU.

Furthermore, cooperation in the development of gas and oil is recognised as a practical and innovative approach to peacefully managing conflicts in the South China Sea.

China and the Philippines need to strengthen their goodwill and demonstrate sincere political intentions in reaching a mutually beneficial agreement for such purpose.

Pursuing cooperation in oil and gas development offers China and the Philippines the golden opportunity to start building a community of shared future in the South China Sea.

Rommel C. Banlaoi is president of the Philippine Association for Chinese Studies and a member of the board of directors of the China-Southeast Asia Research Centre on the South China Sea