Renewed Focus on Talks in the South China Sea Dispute, For Now

By: Cheang Chee Yew

“To jaw-jaw is always better than to war-war,” Britain’s wartime Prime Minister Winston Churchill once said. The sentiment best reflects the latest move by the Philippines, one of the four Southeast Asian countries – including Brunei, Malaysia and Vietnam – locked in a territorial dispute over the potentially energy resource-rich South China Sea with Asia’s largest economy China.

On March 2, Forum Energy plc, the U.K. incorporated upstream oil and gas firm focused on the Philippines, confirmed that the Philippine Department of Energy (DOE) has informed the company to suspend all exploration work at Service Contract (SC) 72 in the South China Sea, west of Palawan Island with immediate effect. The actual suspension begun Dec. 15, 2014.

Forum, a 60.49 percent subsidiary of Philex Petroleum Corp., revealed that the DOE made the decision because SC72 “falls within the territorial disputed area of the West Philippine Sea which is the subject of a United Nations (UN) arbitration process between the Republic of Philippines and the People’s Republic of China.” Philex Petroleum is the petroleum arm of Philippines-listed Philex Mining Corp.

The suspension will remain in place until DOE “notifies the Company that it may commence drilling [at the Reed Bank, or Recto Bank according to Manila]. As a result, the second sub-phase of SC72 has been put on hold until further notice. The terms of the second sub-phase and all subsequent sub-phases will be extended by the term of the force majeure.”

“Whilst it is disappointing that we have been unable, as a result of matters beyond our control, to carry out drilling under the second sub-phase of the SC72 contract, we remain committed to pursuing the project and continue to have the support of the Philippine Government as demonstrated by the extension awarded in respect of the second sub-phase,” Forum Chairman Robin Nicholson commented Feb. 23.

Prior to this latest move, the DOE had approved Forum’s request to extend its drilling plan for two appraisal wells at the Reed/Recto Bank in the Philippines until August 2016. The extension was needed due to the territorial spat between the Philippines and China, which claimed almost 90 percent of the area based on its “nine-dash-line”. There was already a confrontation in 2011 between Chinese navy vessels and a survey ship contracted by Forum, leading to a stoppage in exploration work at the Sampaguita block.

The Philippines argues that arbitration is the only route towards a just and lasting solution to the disputes over the South China Sea and opposes China’s contention that a court has no jurisdiction to hear a complaint, Reuters said March 3. According to the Philippine Department of Foreign Affairs, the UN tribunal may rule on the arbitration case early next year.

The unresolved territorial spat has not prevented China from recently embarking on a charm offensive in South China Sea, particularly towards Vietnam – where anti-Chinese violence erupted last May when China National offshore Oil Corp. (CNOOC) conducted exploration drilling with its first deepwater rig Hai Yang Shi You 981 or HYSY981 (UDW 981 semisub) near Paracel Islands, an area also claimed by Vietnam.

“China’s party and government have long set great store on China and Vietnam’s traditional friendship, and … are willing to promote healthy development of ties,” Reuters quoted China’s President Xi Jinping telling Vietnam Communist Party general secretary Nguyen Phu Trong in a telephone call Feb. 11.

However the mistrust between rival claimants, particularly between the smaller Southeast Asian states against China, runs deep.

Foreign ministers of the Philippines and Vietnam, two of the more vocal contestants of China’s territorial claim in the South China Sea, have commenced discussions in January to establish a partnership on security and defense matters.

“Discussions are still ongoing but both sides agreed to elevate the relations to a higher level,” Philippine Ministry of Foreign Affairs Spokesperson Charles Jose said.

Recognizing the strong reaction from Southeast Asia countries to its more assertive posture in the South China Sea dispute, China appears to be changing tack. It seems to have adopted a less visible assertion of its territorial claims by conducting ad hoc dredging and construction work on contested islands instead.

Last month, Beijing began dredging and other construction works at “Mischief Reef” in the disputed region, prompting the Philippines to voice its objections to the Chinese move.

“China will continue with actions that it thinks it can get away with, like Island reclamations, but will not actively assert claims if the diplomatic cost is too high,” the International Crisis Group’s Yanmei Xie told the Financial Times Feb. 19.

After last year’s anti-Chinese riots in Vietnam and the standoffs between Chinese and Vietnamese naval vessels in the South China Sea arising from China’s drilling activities near the disputed Paracel Islands, the renewed focus on dialogue would provide a welcome respite from the tensions that had engulfed countries in the region.

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