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Published: Wednesday May 21, 2014 MYT 2:10:21 PM
Updated: Wednesday May 21, 2014 MYT 2:11:17 PM

Manila's Philex plans to drill in disputed waters even without partner

MANILA (Reuters) - A unit of Philippine firm Philex Petroleum Corp plans to start drilling two more wells in disputed waters in the South China Sea even without a partner and despite rising tensions with Beijing, its chairman said on Wednesday.

London-listed Forum Energy Plc will likely start drilling the appraisal wells in its Sampaguita gas field in the Reed Bank, which the Philippines calls Recto Bank, in early 2016, said Philex chairman Manuel Pangilinan.

That means the exploration firm will seek another extension of a drilling permit for the area from the Philippine government. Its current permit expires in August 2015.

"Yes, that is our intention," Pangilinan said in a mobile text message to Reuters when asked if the company would conduct oil and gas exploration alone and start drilling by 2016.

"That's the plan of Philex Petroleum, subject to Philippine government approval," Pangilinan said, confirming a report released by local online news site Interaksyon (http://link.reuters.com/fec59v)

"And of course, we do not know how China would react," he said.

Territorial disputes between the Philippines and China have hampered Forum's plan to drill at least two more appraisal wells within the Service Contract 72 exploration permit awarded to it by the Philippine government in 2010. In 2011, Chinese patrol vessels almost rammed a survey ship contracted by Philex in Reed Bank.

Appraisal wells are drilled to assess the size of gas or oil discoveries.

Philex has previously said it had held initial talks with CNOOC, the Hong Kong-listed unit of China National Offshore Oil Company, for a possible joint venture to explore in the Sampaguita field and defuse tensions between the claimant nations.

But the talks have not progressed so far, with Philex saying it was considering speaking to other potential partners. Manila also said any joint venture should adhere to the constitution and that any gas produced should be used domestically.

A deadline for exploration in the Sampaguita field was first set for August 2013, but Forum requested an extension. The Sampaguita gas field is believed to have reserves of as much as 20 trillion cubic feet.

Philex Petroleum, a unit of the Philippines' top gold and copper producer Philex Mining Corp, holds indirect and direct stakes totalling nearly 65 percent in Forum.

China claims nearly all of the South China Sea, while the Philippines and Vietnam, along with Malaysia, Taiwan and Brunei, claim parts of it.

Manila insists the Reed Bank is within its 200-mile exclusive economic zone.

Despite competing claims, the Philippines launched on May 9 a tender for exploration rights in 11 oil and gas blocks, including one in a disputed area, Area 7, in Reed Bank.

(Reporting by Rosemarie Francisco and Siegfrid Alegado; Editing by Joseph Radford)

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