Force majeure inferred from exploration in disputed waters of the South China Sea
A Chinese coastguard vessel is said to have carried out seismic survey work again off the Philippines in a disputed area of the South China Sea, leading Philippine authorities to halt the latest exploration in the area.
Vessel tracking data suggests that CCG Vessel 4201 tracked the Norwegian-flagged survey vessel Geo Coral and its support vessel Mariska G off northwest Palawan, where the Service Contract (SC) is located. 75 from PXP Energy, Vietnamese maritime observer Duan Dang wrote in his South China Sea Brief, according to Philippine daily The Inquirer.
PXP had planned 3D seismic filming on SC 75 and was to drill two appraisal wells on SC 72, all through its subsidiary Forum Energy.
However, PXP confirmed that the Philippine Department of Energy (DoE) told it earlier this month to suspend all exploration activities for these two blocks “until the Security Coordination Cluster , Justice and Peace (SJPCC) has issued the necessary authorization to proceed.”
PXP said this was the first time it had heard of such a clearance requirement from the SJPCC before undertaking work commitments on SC 75 and SC 72.
The DoE in October 2020 had lifted an earlier force majeure on the two offshore blocks after their operators threatened to cancel them, and PXP added that it had kept the department informed of its planned exploration work.
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The SJPCC provides for “the preservation of national sovereignty and the rule of law in the Philippines”.
PXP had chartered the two vessels for its planned survey work on SC 75, which covers 6160 square kilometres.
Although the Chinese coast guard vessel did not directly interfere with the work – the seismic acquisition had not yet started – it would have followed them when the DoE told the operator to stop all work. work on the surface.
VesselsValue shows the Mariska G (ex-Pristine Alpha) en route to Busan, South Korea, while VesselFinder shows the Geo Coral just arrived in Busan.
Exclusive economic zone
SC 72 and 75 are both located in the exclusive economic zone of the Philippines, where the nation has sovereign rights to explore and exploit hydrocarbons.
However, China claims most of the South China Sea for itself via the so-called nine-dash line.
Malaysia, Brunei, the Philippines, Taiwan and Vietnam also have overlapping claims to parts of these waters.
SC 72, which is operated by Forum Energy, a subsidiary of PXP in the UK, covers 8,800 square kilometers in the Recto (Reed) bank and hosts the potentially giant Sampaguita gas field where it is hoped that appraisal drilling will confirm sufficient commercial reserves to be worth developing.
The Cassandra VI vessel was en route to SC 72 to carry out a geographic survey of the site before the DoE effectively halted exploration work in the disputed area.
The SJPCC reportedly agreed that its approval was necessary as a precondition for upstream activities on the blocks “taking into account the political, diplomatic and national security implications of any activity in the Western Philippine Sea”.
PXP and Forum had suspended operations on April 6, although at the time the companies said they believed the DoE suspension was temporary given the department’s earlier lifting of force majeure and its desire to resume exploration work in the area.
Absent further written confirmation from the DoE that the operators could resume exploration immediately, the companies said they consider the suspension of work issued by the department to be indefinite and a force majeure event that would give them the right to be excused from their respective work. obligations.
PXP and Forum added that they had to terminate services and supply agreements to mitigate losses from what now appears to be an indefinite suspension of its latest exploration activities.
The Philippines and China signed a memorandum of understanding in November 2018 to jointly conduct oil and gas exploration and development in the disputed waters of the South China Sea, Philippine President Rodrigo Duterte and Chinese President Xi Jinping to the time apparently putting aside their differences over sovereignty. In the region.
This agreement called for a final framework to be drafted within a year, but no firm agreement has yet been reached despite subsequent statements by the nations’ respective foreign ministers indicating their willingness to advance bilateral cooperation in upstream oil and gas companies.
Nine years ago, the Philippines brought a case against China to the United Nations Convention on the Law of the Sea (UNCLOS) over maritime rights and the status of features in the South China Sea, which would promising for oil and gas.
In 2016, an UNCLOS tribunal ruled unanimously in favor of the Philippines, ruling that China’s nine-dash line and its claim to historic rights in the South China Sea were both invalid under the international law.
PXP holds a 50% interest in SC 75 while Forum, in which PXP holds a direct and indirect interest of 79.13%, holds a 70% interest in SC 72. PXP therefore holds a total economic interest of 54.36 % in SC 72.