Luzon faces blackouts as exploration suspended

THE MAIN Philippine island of Luzon is at risk of experiencing massive blackouts in the near future after the government suspended oil exploration activities in the South China Sea on Chinese intimidation, a congressman said at the weekend.

With the Malampaya natural gas field, which supplies 20% of the country’s energy needs, expected to run dry and without fresh reserves from potential gas fields including the Sampaguita project in Reed Bank, Luzon’s power supply is threatened, Surigao del Sur Rep. Johnny T. Pimentel said in a statement.

“The rest of the country is also worried about the prospect of a Luzon power shortage” the chairman of the House of Representatives Strategic Intelligence Committee said. “We are anxious that if Luzon sneezes, Mindanao and the Visayas might catch a cold.”

Mr. Pimentel noted that the Sampaguita gas field has been dubbed as the next Malampaya because the undeveloped hydrocarbon field below the seabed is located 250 kilometers southwest of Malampaya.

“Sampaguita is estimated to contain anywhere from 3.5 to 4.6 trillion cubic feet (tcf) of gas. This is comparable to if not bigger than Malampaya’s 3.4 tcf of gas upon discovery,” he said.

The country may have to import liquefied natural gas if no alternative is found for Malampaya’s dwindling reserves, he added.

The Department of Energy (DoE) last month suspended oil exploration activities in the South China Sea, a month after President Rodrigo R. Duterte said he had received a warning from China after word spread that some companies had plans in the Reed Bank, locally known as Recto Bank.

Service Contracts (SC) 72 and 75 were put on hold. The Sampaguita gas field is within SC 72 or the Recto Bank basin concession.

The Security, Justice and Peace Coordinating Cluster has taking into account the political, diplomatic and national security implications of any activity in the South China Sea, DoE said.

The tough-talking leader said he was reminded by someone from China to honor their joint exploration agreement if the Philippines did not want to suffer the consequences.

“There’s no other way to put it,” Mr. Pimentel said. “Our energy security is being held hostage by China, even though the two petroleum service contracts cover areas well within our exclusive economic zone.”

The Chinese Embassy did not immediately reply to a Viber message seeking comment.

Under a 2016 United Nations-backed arbitral ruling, which China refuses to recognize, the Reed Bank is part of the Philippines’s exclusive economic zone and continental shelf.

PXP Energy Corp., the operator under SC 75, and its subsidiary Forum Energy Ltd., the operator under SC 72, has invoked a force majeure, canceling drilling activities in Sampaguita scheduled this year.

Before the latest force majeure, the DoE had given Forum until Oct. 16 to drill its two commitment wells in Sampaguita at a cost of $100 million (P5.2 billion).

Economic and maritime experts have warned that halting oil exploration activities in parts of the South China Sea claimed by the Philippines would push companies to rethink their investments in the area.

They issued the warning after the DoE ordered listed PXP Energy Corp. to put on hold its exploration activities in its service contracts until it gets a clearance from a Cabinet cluster overseeing diplomatic and national security concerns.

“Other service contractors have seen what happened to PXP, which already has a long-standing contract and the best prospects for development,” said Jay L. Batongbacal, a maritime expert from the University of the Philippines. “If despite that, the Philippines remains unwilling to commit to the contract, I expect those other contractors to start thinking twice.”

Mr. Batongbacal said potential investors in the country’s energy sector would probably reconsider offshore petroleum exploration and other related investments in the  South China Sea.

He said the Philippine government’s flip-flopping on the exploration project is a sign that it was highly favoring China’s demands.    

In 2020, the DoE, with Mr. Duterte’s approval, issued a resume-to-work notice to the service contractors conducting oil exploration in the areas of service contracts 59, 72 and 75.

Current and potential investors would look to the next administration for policy clarity on these questions because they can’t rely on tentative, shifting decisions on these concerns, said Terry L. Ridon, convenor of infrastructure and investment think tank InfraWatchPH. — Alyssa Nicole O. Tan

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