Friday, August 05, 2011

Chinese 'pressure tactics' pose risks to investors - report

MANILA, Philippines - China’s “pressure tactics” pose risks to firms having interests in the West Philippine Sea (South China Sea) and could hinder the development of the Philippines’ oil and gas reserves in the region, according to a multinational risk consultancy.

In a report released to its clients last July 28, Pacific Strategies & Assessments (PSA) said the tensions in the Spratlys indicate that investors would likely face “serious and costly risks” in their operations.

“While the possibility of a high-level military conflict in the region remains remote in the future, Chinese pressure tactics have shown that the risks faced by non-state oil and gas investors in the South China Sea (SCS) will clearly not be limited to armed conflict in the region,” it said.

PSA, whose clients include multinational firms and embassies, said a prolonged territorial dispute would be the primary hindrance to the development of oil and gas reserves in the region.

“Past and recent developments in the SCS have underscored that a protracted multilateral territorial dispute would be the foremost stumbling block in efforts to commercially develop the oil and gas reserves in the region,” it added.

The Philippines, China, Brunei, Malaysia, Vietnam and Taiwan are claiming parts of the Spratly Islands in the West Philippine Sea.

“Notwithstanding the opportunities in the oil and gas sector, the commitment of Philippine government policies and support vacillate depending on the priorities of the incumbent administration,” the report read.

“This adds to the risks for potential and current oil and gas investors in the Philippines. China, for its part, is expected to maintain its pressure on oil and gas investors in the region,” it added.

PSA, nevertheless, said the Aquino administration had indicated a serious stand to support the gas and oil potentials of the country.

It noted that the government has prodded British firm Forum Energy into exploring Service Contract 72 that includes the Recto Bank (Reed Bank) off Palawan.

PSA, which has offices in Manila, Hong Kong, Shanghai, Beijing, Bangkok, Milwaukee and Sydney, said surveys on SC 72 alone showed 96 billion cubic meters of natural gas potential and 440 million barrels of oil potential.

“The figures are greater than the natural gas reserves of the $130-billion Malampaya project, also in Palawan, as well as the oil reserves in Thailand,” it said.

PSA said the possibility of earning twice the amount from the combined Malampaya project and SC 72 is expected to be a major motivation for the Philippines to remain committed to its territorial claims.

The report noted that the Philippines is heavily dependent on oil imports from the Middle East, with about 90 percent of its oil imports coming from the region.

“The potential oil and natural gas reserves in the South China Sea could prove to be significant in reducing the country’s dependence on Middle East oil,” PSA said.

The Philippines has expressed readiness to bring the territorial dispute in accordance with international law before the United Nations. China, however, said the issue should be resolved through direct negotiations among claimant countries.

No comments: