Philippines: Tycoon Hopeful of Xi-Duterte Energy Deal in South China Sea

Philippines: Tycoon Hopeful of Xi-Duterte Energy Deal in South China Sea

One of the most prominent tycoons in the Philippines is increasingly
optimistic that President Rodrigo Duterte can strike a deal with China to
share oil and gas deposits in a disputed part of the South China Sea.

"At some point a commercial deal will be made that will enable us to develop
the prospect," Roberto Ongpin, whose company Atok-Big Wedge Co. Inc. holds a
minority stake in a gas field in the South China Sea, said in an interview
on Thursday. "It will be astronomical."

Since taking power last year, Duterte has sought to improve ties with China
that deteriorated under predecessor Benigno Aquino. The two countries agreed
to work out "mutually acceptable approaches" to the South China Sea at
formal talks that began last week, an early step toward reaching a deal to
exploit what may be the Philippines's largest gas field.

Ongpin has a history with Duterte: He was forced to sell his Philippine
gaming assets after the president targeted him in a crackdown on online
gaming. Still, Ongpin said he believes the Philippine leader's approach
toward the world's second-biggest economy is moving in right direction.

"There's no way you can bump heads with China," he said by phone.

Ongpin said his company now owns 20 percent of Forum Energy Ltd., which has
a 70 percent stake in the Sampaguita gas field west of the Philippines'
Palawan province. The discovery is estimated to contain 11.4 trillion cubic
feet of natural gas, according to a third-party assessment commissioned by
PXP Energy Corp. PXP owns 80 percent of Forum.

Atok-Big Wedge shares rose 3.2 percent as of the noon break in Manila,
poised for its biggest gain since May 11. The stock has risen 29 percent
this year against the benchmark Philippine stock index's 14 percent advance.

Gas Shortage

That's more than four times the 2.7 trillion cubic feet of reserves in
Malampaya gas field, the largest in the Philippines, which currently fuels
several power plants and generated hundreds of billions of pesos worth of
royalties for the government. Supply from the Malampaya gas field will last
only until 2024, prompting the Energy Department to consider importing
liquefied natural gas to ensure stable supplies.

In dealings with President Xi Jinping, Duterte has set aside an
international court ruling last July that said China had no historic rights
to the resources in waters claimed by the Philippines. The case was brought
by Aquino's administration, which had criticized a deal in the 2000s between
the Philippines, China and Vietnam to cooperate on energy exploration across
a large swath of disputed waters.

Still, many obstacles remain.

War Talk

In a speech last Friday, Duterte said that Xi had threatened to go to war
with the Philippines after he expressed an intention to unilaterally drill
for oil in disputed areas of the South China Sea during an unspecified
meeting. Duterte's new Foreign Secretary Alan Peter Cayetano walked back the
comments on Monday, telling reporters that Duterte made the statement in
reaction to domestic critics.

Duterte's opponents say his overtures to China have undermined the
Philippines's territorial claims and left the country with little room to
maneuver.

China foreign ministry spokeswoman Hua Chunying declined to comment on Xi's
meeting with Duterte, and said disputes should be resolved through dialogue
and negotiation. "Pending final settlement, we advocate shelving the dispute
for common development," Hua said.

China has previously sought to disrupt Philippine attempts to exploit the
resources. In 2011, a Chinese surveillance vessel chased away a survey ship
doing work for Forum Energy.

PXP Energy Chairman Manuel Pangilinan said on May 19 that his group is
awaiting the outcome of the bilateral talks between the Philippines and
China, adding that a code of conduct in the South China Sea would be key to
proceeding with any development.

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Link to Original Article:
https://www.bloomberg.com/politics/articles/2017-05-23/tycoon-optimistic-of-
xi-duterte-energy-deal-in-south-china-sea

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com