MVP eyes new talks with CNOOC over Reed Bank joint exploration

• Source: http://www.bworldonline.com/content.php?title=mvp-eyes-new-talks-with-cnooc-over-reed-bank-joint-exploration&id=141434
• Sunday, March 5, 2017

By Victor V. Saulon (Sub-Editor)

PXP Energy Corp. Chairman Manuel V. Pangilinan is hoping to resume discussions between its subsidiary and China National Offshore Oil Corp. (CNOOC) over the possible joint exploration of an area in West Philippine Sea for its potential natural gas reserves.

“To the extent that the go-vernment has adopted a more friendly, more conciliatory approach to China, I think the atmosphere has become better for a resumption of discussion with CNOOC or with China in general,” Mr. Pangilinan told reporters.

“We’d like to move in that direction,” he said, referring to the next step for Forum Energy Ltd., a 67.19% directly and indirectly owned subsidiary of PXP Energy.

Mr. Pangilinan admitted his group initiated steps to move the project forward, saying “some feelers [were] sent to them if they’re willing to talk.”

“The overall atmosphere created by President [Rodrigo R.] Duterte is more conciliatory, more investor-friendly. I think it will help future discussions, or will help resume hopefully discussions with CNOOC,” he said.

Mr. Pangilinan said the company’s foreign counterpart was also willing to talk.

“That’s the view of China as well,” he said. “But we cannot operate in a vacuum. We are just contractors to the government. The resources of SC [service contract] 72 belongs to the government.”

Forum Energy has been awaiting guidance from the government on the future activity in SC 72, which is covered by the decision handed down by the Permanent Court of Arbitration in The Hague in the Netherlands on July 12, 2016.

The court ruled that Reed Bank -- or Recto Bank, as it is called locally -- where SC 72 lies, is within the Philippines’ exclusive economic zone as defined under United Nations Convention on the Law of the Sea.

Should Forum Energy and CNOOC “arrive at a business arrangement,” Mr. Pangilinan said it has to be within the context of Philippine and Chinese laws.

“We as a Philippine entity cannot violate our laws nor certainly matters of sovereignty. We cannot do that. So we have to stay within Philippines laws, within sovereignty. That’s a tricky bit,” he said.

Asked whether the discussion will be premised on the area belonging to the Philippines, he said: “From our perspective, yes. It’s got to be within Philippine laws, within Philippine sovereignty. As a Philippine company, yes, definitely. We don’t want to violate any Philippine [laws].”

On March 2, 2015, the Department of Energy (DoE) placed SC 72 under force majeure because the contract area falls within the disputed area of the West Philippine Sea, which was the subject of the arbitration process.

Under the terms of the force majeure, exploration work at SC 72 is suspended from Dec. 15, 2014 until the DoE notifies Forum Energy that it may continue drilling.

SC 72 is located offshore west Palawan and covers 8,800 square kilometers and contains the Sampaguita gas discovery.

“We have already told them that [we are ready]. It’s up to them to release the moratorium. If they do, then we have to advise the Chinese that we’re gonna do this. This is our program approved by our government just to let you know,” Mr. Pangilinan said.

“But we have to determine whether there is gas there in SC 72 because Malampaya will run out in the next 10 years. In a way you have to synchronize the period under which Malampaya will start to run versus the time -- and I have no idea how long it will take to develop -- if indeed the reserves [in the area are] of commercial quantity, commercial feasibility,” he added.

LOWER LOSSES

Meanwhile, PXP Energy reported an audited consolidated net loss of P22.4 million for 2016, or nearly four times lower that the previous year’s P87.5 million losses attributed to holders of the parent company.

Including extraordinary items, the reported net loss reached P36.4 million, down from P144 million in 2015.

“The lower net loss was primarily attributable to a 75.7% reduction in overhead resulting from management’s continuing cost reduction efforts and a recovery in impairment loss, net of lower petroleum revenues contributed by its subsidiary, [Forum Energy], arising from the decline in oil output and lower oil prices,” PXP Energy said in a disclosure on Tuesday.

First Pacific Co. Ltd., which owns more than a quarter of PLDT, Inc., is the single biggest shareholder of PXP Energy’s parent, Philex Mining Corp. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls.