PHL seeks 60-40 joint exploration split amid talks with China

By Victor V. Saulon
Sub-Editor

THE Department of Energy (DoE) said its typical arrangement for joint exploration with foreign partners is a 60-40 split in favor of the Philippines, amid talks with China for the possible exploitation of resources in waters claimed by both sides.

“Our benchmark when we go into any sharing is how much eventually will go to the Philippine side,” DoE Assistant Secretary Gerardo D. Erguiza told reporters on the sidelines of a Senate hearing on energy issues on Wednesday.

“Our benchmark [is the] Philippines gets 60%, and therefore the consortium gets 40%,” he added.

Mr. Erguiza’s comments come after Department of Foreign Affairs (DFA) Secretary Alan Peter S. Cayetano traveled to China on Tuesday to meet with Chinese officials to push forward, among others, talks on joint exploration in areas of the South China Sea, parts of which Manila calls the West Philippine Sea.

“This matter, especially the framework, has to be carefully studied,” Mr. Erguiza said.

Similarly, the chairman of the Senate energy committee is backing a 60-40 split, which is what previous partnerships with foreign entities have followed.

“I’m studying it very carefully [because it’s a] political [issue]. So I’m consulting international lawyers, international law experts,” Senator Sherwin T. Gatchalian, the head of the committee, said when asked to comment on the issue.

“They can explore the possibility of exploring this area. The question there is who takes the majority interest. If you look at Malampaya, the Philippine side has a majority, and the foreign party has a minority,” he said, citing the 60-40 split in the offshore Palawan gas project.

The DoE issues service contracts for exploration projects in the Philippines. In each venture, it also approves the activities involved, which the developers follow within a set schedule.

Mr. Erguiza explained that the computation of the country’s share in a joint exploration project would require allowing for cost recovery on the part of the foreign partner.

For instance, if the cost of the venture accounts for half of the project, it will have to be recovered first from the revenue, after which the remaining half will be divided between the Philippine government and the investors on a 60-40 basis, he said.

On Tuesday, Mr. Cayetano said he will be leaving for Beijing on that day upon the invitation of the Chinese foreign minister to discuss “broad areas of collaboration and cooperation.”

He said in such talks, the two sides “always make it a point to talk about our differences in our dispute in the South China Sea.” But he said the sides talk about the issue in the context of how they could improve the situation.

“We are trying to find a legal framework acceptable to the Philippines and that will pass the requirements of the Philippine Constitution and also acceptable to the Chinese people and the Chinese leadership in where we can jointly explore areas where there is a dispute in the South China Sea,” he said in a news conference.

“The starting point is finding what’s there,” he said, adding that doing so would require funding exploration.

“But if we can find a legal framework and maybe our companies can work together then it will be at no cost to the government and there’s really evidence leading to large deposits of oil and gas in the area,” he said.