Chinese, Philippine firms join forces to look for oil in South China Sea

Chinese, Philippine firms join forces to look for oil in South China Sea

Peter Harmsen Beijing

A Chinese and a Philippine oil company have agreed to jointly look for oil and gas in the South China Sea after a recent Chinese proposal to reduce tensions in the area, state media said on Thursday.

The China National Offshore Oil Corp. (CNOOC) and the Philippines National Oil Co. will set up a committee that is to select parts of the sea where exploration may be carried out, the China Daily reported.

The two companies have also agreed on a program to "review, assess and evaluate relevant geological, geophysical and other technical data available to determine the oil and gas potential in the area".

The South China Sea has been the object of low-intensity but prolonged rivalry in recent years as adjacent countries believe it might hold large energy reserves, although that has never been proven.

Brunei, Malaysia, the Philippines and Vietnam, as well as China and Taiwan claim the Spratly Islands, a potentially oil- rich archipelago in the South China Sea.

Tensions however have been on the decline, arguably reflecting renewed efforts by China to be on friendly terms with its neighbors.

"It's more important for China to develop peacefully and progressively, and a stable environment is necessary for China to develop," said K. K. Leung, an expert on Chinese politics at City University of Hong Kong. "So conflict in the area is the last resort."

When China's second-ranking leader Wu Bangguo visited the Philippines in late August, he proposed joint oil exploration and development in the area in a gesture seen as helpful in easing tensions in a potential flashpoint.

The Association of Southeast Asian Nations last year signed a treaty with China aimed at preventing an escalation of tensions over the Spratlys.

In a move notable mostly for its symbolic value, China in early October signed a non-aggression pact with the 10-member group.

All countries around the South China Sea have said they are ready to avoid conflict in the area.

But the willingness to compromise could come under strain if the much-dreamt-of huge oil reserves were suddenly to emerge, Leung said.

Significantly, the new Sino-Philippine agreement will not include exploration in the particularly sensitive Spratly region, according to newspapers in the Philippines.

While China has said it is wants to work with other nations in looking for oil in the South China Sea, it remains committed to make the area part of its strategy to reduce its dependence on Middle Eastern oil.

CNOOC has been active in the region, and is already the largest offshore oil producer in Indonesia.

The China Daily on Thursday said Wei Liucheng, former president of CNOOC, has been nominated for the post of governor of Hainan, an island province in the northernmost part of the South China Sea.

The newspaper referred to media speculation that the Hainan government might take advantage of Liu's experience in the oil industry and his relations with foreign oil companies to tap the area's potential.