Joint exploration will test UN ruling

Manila is walking a tightrope in inviting Beijing to explore jointly the Reed Bank. Deftly must it balance pressing economic needs against lasting sovereign interests. Only then can it craft a deal that will stand legal scrutiny.

Reed Bank is touted as the answer to the Philippines’ energy quest. The 8,866-square-kilometer submerged tablemount lies on the Palawan shelf. Underneath is fuel to run factories and light up homes for centuries. At the southeastern corner alone is Sampaguita Field, proven to hold 4.5 trillion cubic feet of natural gas and millions of barrels of oil. Luzon’s present gas source for nearly half its electricity, Malampaya Field farther south, is to run out in a decade. Sampaguita must be developed this early as alternative. Gas extraction could be easy, in sea depths of only nine to 45 meters. Inaction would be ruinous: ten-hour daily blackouts in Luzon, then economic collapse.

The government in fact had assigned Sampaguita for exploration in 2010. London-based Forum Energy, later acquired two-thirds by Filipino Philex Petroleum, swiftly completed seismic surveys. It was preparing to bore two test rigs in 2012 when Beijing dispatched armed vessels to interlope. Supposedly China owned the area by ancient historic right. It delineated such claim via a nine-dash map encompassing the whole South China Sea, debarring the Philippines and four other neighbors.

Manila halted the exploration. Sending naval counter-forces would have escalated the conflict. The Philippine Constitution forbids war as instrument of national policy. The United Nations further outlaws war as means of settling disputes. Manila sought arbitration.

The UN court in 2016 rubbished Beijing’s claim. Modern international law recognizes no expansive historic rights, only limited territorial waters and maritime jurisdictions. The UN Convention on the Law of the Sea grants littoral states up to 200 miles from shore of exclusive economic zone. Reed Bank is well within that 200-mile Philippine EEZ, yet 600 miles from China’s nearest province. Reed Bank being outside China’s EEZ, the court ruled, Beijing violated Manila’s exclusive right to the resources by intruding in the exploration.

Manila and Beijing profess to strengthen economic and diplomatic ties. Yet Beijing rejects the UN verdict. Its communist rulers delude themselves in the unfounded historic claim, so are hard-pressed to accept global order. As it aspires for world respect, China shamelessly bullies law-abiding Philippines with military threats. Manila militarily is handcuffed. But the UN ruling is a more potent weapon.

Manila is giving Beijing economic concessions – and a way out of lawless disrepute – through a joint venture in the Reed Bank. Aside from Sampaguita are five times more oil, gas, and other mineral deposits. Abiding by the UN decision of Philippine sovereign right would be to China’s advantage. China can share in the resources, including food, that abound in shallower waters like Reed Bank. It can also gain stature, as it expands and extends influence globally. Grabbing Reed Bank is theft in the eyes of the world; China would be treated with suspicion.

Manila, thus, must understand the power of the UN arbitral award. It cannot succumb to time and military pressures. If it does, it loses not only the strength of the favorable UN ruling, but Reed Bank itself and the entire EEZ. Defeatism has no room in talks on the terms of the joint venture.

In such deal Beijing can assign state-owned China National Offshore Oil Company to the exploration and extraction. China can get up to 50 percent of the output, like Shell as Manila’s partner in Malampaya. Expectedly sovereignty matters would be sticky, like taxation and venue of dispute settlement. The Dept. of Foreign Affairs must find ways for Beijing to agree. An agency can handle such issues, akin to the Manila Economic Cooperation Office under Malacañang to suit a one-China policy while keeping ties with Taiwan.

The joint venture needs to follow strict constitutional rules as well. Any contract surely will be brought before the Supreme Court. The terms should be acceptable to the justices, lest Reed Bank be left to waste.

In the Constitution, Article XII, National Economy and Patrimony, Section 2 states: “All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least 60 per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding 25 years, renewable for not more than 25 years, and under such terms and conditions as may be provided by law...

“The State shall protect the nation’s marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens...

“The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources.

“The President shall notify the Congress of every contract entered into in accordance with this provision, within 30 days from its execution.”

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