Pursuing Philippines-China Cooperation On Oil And Gas Development – Analysis

Despite the ruling of the Philippine Supreme Court on 10 January 2023 declaring unconstitutional the 2005 Joint Marine Seismic Undertaking (JSMU), the Chinese government still expressed its seriousness to pursue cooperation on oil and gas development with the Philippines.

In his official statement, Chinese Foreign Ministry spokesperson Wang Wenbin exclaimed, “China remains committed to properly handling maritime disputes in the South China Sea with countries directly concerned, including the Philippines, through dialogue and consultation, and to actively exploring ways for practical maritime cooperation including joint exploration.” 

Wang described the JMSU as playing “an important role in promoting stability, cooperation and development in the region." He stressed that the JMSU  provided an important step to  promote  maritime cooperation in the South China Sea.

Philippine Department of Foreign Affairs (DFA) spokesperson Tessie Daza also announced that the Philippines-China cooperation on the development of oil and gas remained a viable option for the two countries clarifying that the ruling on the JMSU would indeed guide future oil and gas talks.

The JMSU was a tripartite arrangement involving the Philippine National Oil Corporation (PNOC), the China National Offshore Oil Company (CNOOC), and the Vietnam Oil and Gas Corporation (PetroVietnam).  Signed in 2005, it covered natural gas and oil exploration activities in the SCS mostly in the Kalayaan Island Group (KIG).   

Presidential Decree 1596 signed in 1978 by then President Ferdinand E. Marcos declared the KIG as an integral part of Philippine territory.  Thus, there was a legal interpretation in the Philippines arguing that the location of the JMSU took place in Philippine territory pursuant to PD 1596.  But other claimants in the South China Sea, especially in the Spratly Islands where the KIG is located, are challenging  the legal status of PD 1596.

The JMSU covered a total exploration area of 142,886 kilometers. The main purpose of the JMSU was to pursue joint development in order to transform the South China Sea from a flashpoint of armed conflict to a sea of peace, friendship and cooperation. 

The first phase of the JMSU covered the period 2005-2008. But the project was discontinued in 2008 because of domestic problems in the Philippines. Groups opposed to the JMSU questioned the constitutionality of the tripartite arrangement because of the role of foreign countries doing exploration activities in Philippine territories.

After 14 years of legal deliberations, the Philippine Supreme Court proclaimed the JMSU as unconstitutional.  

Interestingly, the ruling came out just days after President Ferdinand R. Marcos Jr. returned from his state visit to China on 3-5  January 2023.  During the visit,  both governments agreed to resume discussions on oil and gas development in accordance with the spirit of the Memorandum of Understanding on Cooperation on Oil and Gas Development between the Government of the People’s Republic of China and the Government of the Republic of Philippines signed in 2018.  

Voting 12-2-1, The Supreme Court En Banc ruled that the JSMU violated the Philippine Constitution for allowing wholly-owned foreign corporations to participate in the exploration of the country’s natural resources without observing the safeguards provided in Section 2, Article XII of the 1987 Constitution.   The Court argued  that the JMSU involved the exploration of petroleum resources falling within the prohibitions of the Philippine Constitution.

Former President Gloria Macapagal Arroyo who supported the signing of the 2005 JMSU during her  term released an official statement expressing her respect to the Supreme Court decision.  Arroyo is currently the Senior Deputy Speaker of the Philippine House of Representatives.  She joined President Marcos Jr during his China visit. Marcos Jr even described Arroyo as her secret weapon in promoting cooperation with China.

However,  Atty Harry Roque, an international law expert who served as Spokesperson of Former President Rodrigo R. Duterte,  expressed his vehement dismay over the ruling  and  urged the Office of Solicitor General (OSG) to immediately appeal the High Court’s decision voiding the JMSU. 

Roque argued that  the JSMU actually conformed with the United Nations Convention on the Law of the Sea (UNCLOS), particularly on the definition of the territorial sea. Roque elaborated, “the decision to nullify JMSU is incompatible and inconsistent with the relevant provisions of UNCLOS. We do not have sovereignty over the area covered by the JMSU even if it falls within our exclusive economic zone (EEZ).”  He further explained, “the Philippines cannot enforce its Constitutional and legal jurisdiction beyond its sovereign territory. Thus, any provision of the 1987 Constitution should not apply to JMSU.”

Apparently, the Philippines and China still need to address perennial legal issues to really pursue pragmatic cooperation in the development of natural gas and oil.  Without clarity on the legal framework of cooperation, it is truly cumbersome for China and the Philippines to proceed.

Related with legal issues are defined locations where the two countries can develop natural gas and oil together.   Will the locations of cooperation be done in territorial waters, EEZ or extended continental shelves of parties?

The Philippines and China can  only undertake mutually beneficial development of natural gas and oil together if both parties can decisively settle legal issues and clearly identify areas or locations of  bilateral cooperation.  Both parties need to go back to the working table to iron out details, thresh out differences and strike common grounds for practical maritime cooperation. 

It is also imperative that cooperation on the development of natural gas and oil between the two parties shall not undermine their respective national positions on sovereignty issues and sovereign rights in the South China Sea.   

As mandated by UNCLOS,  all parties have the duty to cooperate with respect to the use of the seas.  In the enjoyment of their maritime freedoms and rights, UNCLOS also requires all states to uphold the principle of due regard by exercising self-restraint in the conduct of unilateral activities affecting the maritime freedom and rights of others.

The duty to cooperate and the principle of due regard shall inform the Philippines and China as they pursue cooperation for the development of natural gas and oil in the South China Sea.

Dr. Rommel Banlaoi is president of the Philippine Society for Intelligence and Security Studies and former president of the Philippine Association for Chinese Studies.