China and Philippines May Sign Agreement on Joint Oil Drilling: Report

State-owned China National Offshore Oil Corp. (CNOOC) may sign an agreement with Philex Mining Corp., Philippine’s biggest mining company, to jointly develop the Liyue Bank, or Reed Tablemount, in the South China Sea, the Manila Standard Today newspaper reported on June 4.

Mike Toledo, Philex senior vice president for communications, said in an interview that a team of experts including the company’s chief executive Manny Pangilinan visited Beijing two weeks ago upon the invitation of the Chinese government.

"I gathered that the Chinese are interested to develop the area," Toledo said.

Just 400 kilometers away from the Huangyan Island, which has been the center of China-Philippines faceoff since early April, Liyue Bank covers around 8,800 square kilometers and contains approximately 16.6 trillion cubic feet’s natural gas and 416 million barrels of crude oil.

Toledo added that the current sea row would not deter both companies to forge a joint agreement to pursue oil and exploration activities in the area.

Toledo said CNOOC had the "experience and financial muscle" to develop the natural gas resources, and Philex needed a "strong partner" to develop what could be Philippine’s biggest natural gas platform.

Philippine Petroleum Corp., a subsidiary of Philex Mining, estimated that it would take six to ten years to develop the area and resources underlying there could be for exploitation for as long as 100 years.

Experts say the potential deal is an exit strategy of the Philippine government aimed at deescalating the sea tension with China.