Among the areas in the South China Sea, Reed Bank is the most promising area for oil and gas exploration. Recto Bank is said to contain most of the oil and natural gas in the South China Sea.
Exploration in Reed Bank is covered by Service Contract 72 which is being operated by Forum Energy Ltd. Forum Energy is a UK incorporated upstream oil and gas company with focus on the Philippines. Its principal asset is a 70% interest in Service Contract 72 Reed Bank offshore west Palawan, which contains the Sampaguita gas discovery. The Service Contract is currently in the second Sub-Phase of the Exploration Period which involves the drilling of two wells. PXP Energy has a 67.19% controlling interest in Forum Energy Plc with 48.76% held directly and 18.43% held indirectly through FEC Resources, Inc., a 54.99%-owned subsidiary. Manny Pangilinan (MVP) led First Pacific holds an effective economic interest of 42.4% in PXP Energy.
In 2014 then President Benigno Aquino III imposed a moratorium on oil exploration in the South China Sea as the Philippines filed a case against China at the Hague. While the Philippines filed a case against China at the Hague, Chinese vessels regulary patrol the Reed Bank. The moratorium covered the Service Contract 72. President Duterte just lifted that moratorium.
It has been said that Chinese oil companies might be brought on board as a win-win solution for the exploration to proceed. Since 2012, MVP has been negotiating with China National Offshore Oil Corporation (CNOOC), one of China’s state-owned oil companies, for a deal but of no result. Up to the present exploration in the area has been suspended.
While a deal with CNOOC has eluded MVP, Dennis Uy has been able to bag a deal with CNOOC. In May 2019, After a series of engagement talks, a Memorandum of Understanding (MOU) was entered into by State-owned firm Philippine National Oil Co. (PNOC), Phoenix Petroleum (PNX) and CNOOC Gas and Power Group Co. Ltd (CNOOC G&P). The MOU will allow the three companies to explore and discuss business opportunities and cooperation in relation to the equity investment in Tanglawan Philippine LNG Inc. and other companies relating to the project, PNOC facilities, market development, PNOC banked gas, and future energy projects.
Just March of this year (2020), Dennis Uy’s Udenna Corp. bought Chevron’s 45% stake in the Malampaya gas project (Service Contract 38). Shell Philippines Exploration BV (Spex) which also owns 45%, is operator of the Malampaya gas project. Spex is divesting from Malampaya as part of an ongoing portfolio rationalization to simplify and increase the resilience of Shell’s businesses worldwide. And Dennis Uy is exercising its right of first refusal on Spex’s stake.
Reed Bank is adjacent to the Malampaya field. If Udenna becomes the operator of Malampaya it can readily deploy exploration to Reed Bank as it just adjacent. Facilities available at Malampaya can easily be tapped for exploration and development of Reed Bank.
According to Energy Secretary Alfonso Cusi, “The lifting of the suspension places the service contractors under legal obligation to put capital into the contract areas and hire Filipino engineers and technical workers,”
And speaking of capital, it is what PXP needs to raise and it is what PNX partner CNOOC has plenty of.
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