US Firms Eye Philippine Projects as China Row Stalls Oil Drills

(Bloomberg) — US companies are interested in oil and gas projects in the Philippines, Manila’s energy chief said, as tensions with Beijing hamper exploration in disputed areas of the South China Sea.

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The projects that could involve American firms “are ultra deep within the archipelago,” Philippine Energy Secretary Raphael Lotilla said in an interview with Bloomberg Television’s Haslinda Amin on Friday. He declined to name the companies pending firm commitments, but said some of them could be investors returning to the region.

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“The American companies have assured us that their interest is driven by the economics and not by changes in political administrations,” Lotilla said.

The Philippines has been exploring ways to boost energy supply as its key Malampaya gas field — which supplies a fifth of the country’s power requirements — nears depletion. 

Tensions with Beijing have prevented Manila from exploring contested areas of the energy-rich South China Sea. Philippines-listed PXP Energy Corp.’s exploration work in the South China Sea’s Reed Bank has been stalled amid the maritime dispute, which has flared up again in the past weeks due to the presence of a huge Chinese ship near the Southeast Asian nation’s shores.

Malampaya’s service contractor last year said it was preparing to drill new wells to boost production. Drilling in nearby fields is set to start this year, and “by 2026 or 2027 we will have additional gas flowing from there,” Lotilla said.

President Ferdinand Marcos Jr. this month signed a law aimed at developing the natural gas industry, as the country moves to cut reliance on coal. The Southeast Asian nation relies heavily on imported coal, oil, and gas, making it vulnerable to global price swings which impact energy costs for industries.

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The country is seeking to increase the share of renewable energy in its power mix to 35% by 2030 and 50% by 2040. The nation’s transition to clean energy will require an investment of around $500 billion between 2024 and 2050, according to the government’s estimates.

“If the financial resources were there, we can go as the sky is the limit as far as renewable energy is concerned,” Lotilla said. “The challenge is in the cost.”

Marcos, who took office in 2022, has courted foreign companies to invest in his country’s renewable energy sector.  The Philippines signed this week a deal with United Arab Emirates-based Masdar for long-term renewable energy investments worth $15 billion.

Lotilla also said that the Philippines’ civil nuclear agreement with the US coming into force last year allows for exchange of information and technologies.

“That has enabled our private sector to now directly get in touch with American companies and discuss the possibilities,” he said.

—With assistance from Joanne Wong.

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