China-Philippines Joint Development of South China Sea Hydrocarbon Resources: Challenges and Future Priorities

Kang Lin & Luo Chuanyu

Joint development is an important part of China's South China Sea policy. Benefiting from the steady development of the South China Sea situation and especially from the recent agreement between China and ASEAN countries on a single draft negotiating text of the Code of Conduct(COC) in the South China Sea, together with the improvement of China-Philippines relations and the establishment of the bilateral consultation mechanism on the South China Sea issue since late 2016, it is currently a favorable opportunity to promote cooperation on oil and gas resources in the South China Sea. A substantial breakthrough, if achieved, will not only help further consolidate the China-Philippines relations and reduce the adverse impact of the South China Sea arbitration case, but also probably prompt other South China Sea countries to follow suit. Therefore, it is of practical significance to study the feasibility and challenges of bilateral joint exploitation of hydrocarbon resources in the South China Sea.

Current Status of China-Philippines Oil and Gas Development in the South China Sea

The South China Sea is rich in oil and gas resources. According to statistics,the oil reserves in the South China Sea are between 20 and 30 billion tons of oil equivalent, and the natural gas reserves are about 20 trillion cubic meters,making the area one of the largest hydrocarbon sources yet to be exploited.Given the strategic significance of oil and gas resources, their exploitation in the disputed waters of the South China Sea is also an important concern of relevant countries.

China and the Philippines have jurisdiction disputes over the exploitation of oil and gas resources in the Liyuetan (Reed Bank) Basin and the Northwest Palawan Basin. The Liyuetan Basin is completely within the nine-dash line of the South China Sea, and recent exploration shows that there are good prospects for hydrocarbon resources development in its southern depression. Located to the southwest of the Philippines, the Northwest Palawan Basin consists of two parts, the West Palawan Basin and the North Palawan Basin, with a total area of about 30,000 square kilometers.1Yao Вochu, Wan Ling and Liu Zhenhu, “Tectonic Dynamics of Cenozoic Sedimentary Вasins and Hydrocarbon Resources in the South China Sea,” Jоurnаl оf Сhinа Univеrsitу оf Gеоsсiеnсеs, No.5, 2004,pp.546-547.Part of the Northwest Palawan Basin is within the nine-dash line. In 1979, the Philippines discovered the Nido oil field in the area and subsequently discovered several small- and medium-sized oil and gas fields.Currently, the accumulated detected oil reserves are 141 million tons of oil equivalent, and the natural gas geological reserves reach 129.9 million cubic meters.2Li Jinrong, Fang Yinхia and Zhu Ying, “Hydrocarbon Resources within the U-shaped Line in the Southern South China Sea: Distribution Characteristics and Development Status,” Сhinа Oсеаns Lаw Rеviеw, No.1, 2013, p.37.

The Philippines relies heavily on imported oil. In 2016, its crude oil imports reached 78.772 million barrels, while its domestic crude oil production was only 135,000 barrels.3“Philippine Oil Imports Fell by 13.5% in 2016,” Chinese Ministry of Commerce, March 25, 2017, http://www.mofcom.gov.cn/article/i/jyjl/j/201703/20170302538525.shtml.In order to alleviate the pressure from energy imports and be less dependent on the international energy market,the Philippine government has continuously increased the exploration of hydrocarbon resources in the South China Sea and actively sought cooperation with Western oil companies to jointly develop the resources.4Mark J. Valencia, Sоuth-Eаst Аsiаn Sеаs: Oil undеr Тrоublеd Wаtеrs, Oxford: Oxford University Press,1985, pp.35-36.The Philippines has always regarded the Northwest Palawan Basin as a key area for offshore exploration and development and has invested large amounts of resources, but the actual results achieved so far are far from ideal with few successful cases. The Malampaya gas field, located in the Service Contract 38 license area and 80 kilometers northwest of the Palawan Island, was jointly developed by Shell Philippines Exploration, Chevron Malampaya and the Philippine National Oil Company. With a potential natural gas reserve of 76.5 billion cubic meters (about 55 million tons of oil equivalent), it was officially put into operation in October 2001 with a mining period of 25 years. It is the largest gas field project for commercial development in the Philippines' history. As the Malampaya gas field is scheduled to close down in 2025, the Philippines is eager to find new oil and gas fields. The Philippine Foreign Secretary Alan Peter Cayetano has publicly stated the country's commitment to joint oil and gas exploration with China in relevant waters, given that the Malampaya field will be exhausted in less than 10 years.5“Philippine Media: Duterte Gives Green Light to Joint Eхploration in South China Sea with China,”Huаnqiu, August 17, 2017, http://world.huanqiu.com/eхclusive/2017-08/11138695.html.

The Liyuetan Basin is recognized as being rich in hydrocarbon resources. The Philippine government plotted out a block named PCR-1 in the South China Sea in 2002, which included the basin, and later subdivided the block several times into multiple smaller blocks for open tendering,one of them called GSEC-101. During then Philippine President Gloria Macapagal Arroyo's visit to China in 2004, China National Offshore Oil Corporation (CNOOC) and the Philippine National Oil Company signed the Agreement for Joint Marine Seismic Undertaking in Certain Areas in the South China Sea, agreeing to conduct cooperation in early-stage exploration of hydrocarbon resources near the Liyuetan Basin. Vietnam subsequently joined in, and oil companies from the three countries signed a tripartite agreement in Manila in March 2005 and began to carry out a series of pragmatic maritime cooperation.6Wu Shicun, Sоlving Disрutеs fоr Rеgiоnаl Соореrаtiоn аnd Dеvеlорmеnt in thе Sоuth Сhinа Sеа: А Сhinеsе реrsресtivе, Oхford: Chandos Publishing, 2013, p.164.The selected area for the trilateral cooperation is rightly located at Block GSEC-101. However,when the first phase of the agreement expired at the end of 2008 and the three parties needed to work out an action plan for the second three years,the Philippine parliament voted down the plan on the grounds that the Liyuetan Basin is located in the Philippines' exclusive economic zone (EEZ)and thus the development of marine resources within the region involves the country's sovereignty rights. Subsequently, the Philippine parliament passed the Territorial Sea Baselines Law in 2009, claiming sovereignty over some islands and reefs of the Nansha Islands (Spratly Islands) in its western waters, and clearly delineated the extent of its alleged EEZ. Based on this law, the Philippine authorities changed Block GSEC-101 into Block SC72 for separate open tendering. In 2010, the Forum Energy Technologies UK acquired the exploration permit for the block, and found a world-class gas field Sampaguita in the area, with a potential gas reserve of up to 56.6 billion cubic meters.7Kang Lin, Great Chapter: Тimе tо Sаil in thе Sоuth Сhinа Sеа, Southern Publishing House, 2014, p.136.In the next year, the company announced the beginning of exploration activities in Block SC72, which were not actually implemented due to Chinese opposition. The Philippine government has twice extended the execution period for its Liyuetan gas exploration project, in 2015 and 2016 respectively.

During the administration of Benigno Aquino III, the Philippine government basically excluded China from joint development in the South China Sea and encouraged domestic oil companies to unilaterally go to the Liyuetan Basin for on-the-spot exploration. In the fourth round of contract projects launched by the Philippine Department of Energy in June 2011, the third and fourth blocks of the 15 blocks open to exploration by foreign investment were located within the nine-dash line.8Li Guoqiang, “Policy Adjustment in Resources Development in the South China Sea,” Intеrnаtiоnаl Studiеs, No.6, 2014, p.107.Due to strong opposition from China, the Philippines' invitation for bids failed to obtain positive response from large Western oil and gas companies. Given this, the Philippines' Philex Petroleum Corporation began contact with CNOOC in 2012 to discuss joint development of Block SC72. The preliminary consultations between the two sides progressed smoothly. However, at the last moment when the two sides were about to sign a cooperation agreement, the Philippine government suddenly requested the inclusion of the so-called “reclamation agreement”in the contract, with the aim of clarifying the roles of the Philippines and China as owner and development partner respectively.9Li Jinming, “An Analysis on the Prospect of China-Philippines Joint Development of Reed Вank's Oil and Gas Resources,” Pасifiс Jоurnаl, No.5, 2015, p.83.As this was equivalent to demanding China's recognition of the Philippines'sovereignty rights over Block SC72, the consultation broke down.The eighth submission filed by the Philippines in the South China Sea arbitration case10The Philippines requested the arbitral tribunal to adjudge and declare that “China has unlawfully interfered with the enjoyment and exercise of the sovereign rights of the Philippines with respect to the living and non-living resources of its exclusive economic zone and continental shelf.” See Permanent Court of Arbitration (PCA), The South China Sea Arbitration Case (Тhе Rерubliс оf thе Philiррinеs v. Тhе Pеорlе's Rерubliс оf Сhinа), The Philippines' Memorial - Volume I, https://files.pca-cpa.org/pcadocs/Memorial%20 of%20the%20Philippines%20Volume%20I.pdf.also directly involved the development of hydrocarbon resources. For the highly controversial Block SC72, the Philippines claimed that Reed Bank is part of the its continental shelf according to the United Nations Convention on the Law of the Sea (hereinafter referred to as the “Convention”), and therefore the exploration and development of hydrocarbon resources in the area is fully justified, in accordance with international law without violating China's sovereignty rights.11PCA, The South China Sea Arbitration Case, The Philippines' Memorial - Volume I.Although the Philippine statement was flawed to a great extent, the final ruling of the arbitral tribunal supported the Philippines' appeal.12PCA, The South China Sea Arbitration Award of 12 July 2016, https://pcacases.com/web/sendAttach/2086.

After Rodrigo Duterte took office, the Philippines' policy toward China was greatly adjusted. During Duterte's first visit to China in October 2016, leaders of the two countries reiterated that contentious issues on the South China Sea are not the sum total of the China-Philippines bilateral relationship, and both sides also reaffirm the importance of addressing their territorial and jurisdictional disputes by peaceful means, without resorting to the threat or use of force, through friendly consultations and negotiations by sovereign states directly concerned.13“Joint Statement of the People's Republic of China and the Republic of the Philippines,” October 21,2016, https://www.fmprc.gov.cn/nanhai/eng/zcfg_1/t1407682.htm.This laid the political foundation for the two countries to properly handle the South China Sea issue in the new era. For the exploitation of hydrocarbon resources, Duterte has repeatedly expressed his willingness to cooperate with China in joint development.In his State of the Nation Address in July 2017, Duterte stressed that the Philippines was looking forward to joint exploration of oil resources with China in the South China Sea, and hinted that it would eventually be realized through a joint venture.14“Philippine President: China-Philippines Dialogue on Joint Oil Eхploration in the South China Sea Underway,” Huаnqiu, July 25, 2017, http://world.huanqiu.com/eхclusive/2017-07/11028879.html.In September the same year, the Philippine Energy Secretary Alfonso Cusi indicated at the 35th ASEAN Ministers on Energy Meeting that the Philippines and China would jointly explore hydrocarbon resources in Block SC57 off the northwestern coast of Palawan Bay, and a cooperation plan had been drawn up. It is reported that the block,covering an area of 720,000 hectares and located outside the nine-dash line of the South China Sea, will be jointly developed by the Philippine National Oil Company, CNOOC and Jadestone Energy.15“China-Philippines Joint Oil and Gas Eхploration in South China Sea Now Awaiting Presidential Signature,” Wоrld Nеws (Philippines), September 28, 2017, https://worldnews.net.ph/epaper/view/1773/70846.With regard to Block SC72, which is located in a jurisdictionally disputed area between China and the Philippines, the two countries, according to a spokesman for the Office of the Philippine President, would need to discuss merits of the case under the guidance of international legal principles before joint development and reach written cooperation agreement.16“Philippine Presidential Office: China Can Вe Kept under Control in South China Sea Joint Eхploration,”Wоrld Nеws (Philippines), March 6, 2018, https://worldnews.net.ph/epaper/changeview/2018-03-06.As revealed by Secretary Cayetano in August 2018, the Philippines had set up a technical working group for joint exploration in the disputed waters of the South China Sea and that the two countries are expected to sign the cooperation agreement as soon as possible.17“Philippines Officially Notifies China to Set up Joint Eхploration Working Group,” Wоrld Nеws(Philippines), August 12, 2018, https://worldnews.net.ph/epaper/view/4364/86350.In general, President Duterte's promotion of a thaw in China-Philippines relations in a relatively short period of time has created favorable conditions for the two sides to carry out pragmatic maritime cooperation.

Challenges of Joint Development

The current status of China-Philippines relations and the overall stabilization of the South China Sea situation have made it possible for the two countries to jointly develop hydrocarbon resources in the South China Sea. However,it is still necessary for both sides to identify where they agree and disagree on the specific connotations, legal basis and necessary conditions of “joint development.”

First of all, there are differences in the two countries' understanding of joint development. In Chinese scholars' general opinion, joint development means that two or more countries reach an intergovernmental cooperation agreement for the development of natural resources in areas with overlapping claims, to the end of jointly exercising jurisdiction over the areas and creating conditions for final settlement of disputes.18Gao Zhiguo, “The Legal Concept and Aspects of Joint Development in International Law,” Oсеаn Yеаrbооk, Vol.13, 1998, p.112.In this regard, some Philippine scholars believe that currently there are differences in China's and the Philippines' understanding of the issue. As pointed out by Jay Batongbacal, joint development in China's eyes is based on the recognition of disputed waters and the development and utilization of marine resources,and specifically covers both Block SC72 and Block SC57. By contrast, the Philippines prefers the concept “joint exploration” to refer to pragmatic maritime cooperation between the two countries, which emphasizes resources exploration rather than comprehensive exploitation and utilization, and the scope involved is basically limited to Block SC57.19Jay Вatongbacal, “Philippine-China Joint Development Talks Still at an Impasse, Despite Green Light,” Asia Maritime Transparency Initiative, April 13, 2018, https://amti.csis.org/philippine-china-jointdevelopment-impasse.

Second, there are differences in the international legal basis for joint development. It is generally believed that the legal basis mainly comes from two aspects. One is the principle of cooperation20Paragraphs 1 and 3 of the UN Charter's Article 1 stipulate that the purposes of the United Nations include “to bring about by peaceful means, and in conformity with the principles of justice and international law, adjustment or settlement of international disputes or situations which might lead to a breach of the peace … to achieve international co-operation.” See Charter of the United Nations, http://www.un.org/en/charter-united-nations.and the obligation of negotiation21Paragraph 1 of the Charter's Article 33 stipulates that “The parties to any dispute, the continuance of which is likely to endanger the maintenance of international peace and security, shall, first of all, seek a solution by negotiation, enquiry, mediation, conciliation, arbitration, judicial settlement, resort to regional agencies or arrangements, or other peaceful means of their own choice.”as stated in the UN Charter. The other is the “provisional arrangements” described in the Convention.22Articles 74 and 83 of the United Nations Convention on the Law of the Sea stipulate the delimitation of eхclusive economic zones and continental shelves, emphasizing that “the States concerned, in a spirit of understanding and cooperation, shall make every effort to enter into provisional arrangements of a practical nature.” See relevant provisions of the Convention, http://www.un.org/Depts/los/convention_agreements/teхts/unclos/unclos_e.pdf.For a long time, these were the international legal basis for China-Philippines consultation and dialogue on joint development. However, as the ruling of the South China Sea arbitration supported the Philippines' claims, quite a few Philippine people have seen it as an important legal basis for the country to deal with South China Sea disputes and joint development issues in the future. Even Duterte once indicated that he would not give it up, which he considered is a “historic victory” for the Philippines and could be utilized at the right time.

China and the Philippines convened the Third Meeting of the Bilateral Consultation Mechanism on the South China Sea in Beijing on October 18. Both sides reiterated that the contentious maritime issues are not the sum total of the China-Philippines relations.

Last, from a bilateral perspective, there are two necessary conditions for promoting joint development of hydrocarbon resources in the South China Sea. First, both sides must acknowledge the existence of maritime delimitation disputes in the South China Sea and have the will to fulfill the principle of cooperation and the obligation of negotiation. China and the Philippines once held many consultations on properly handling maritime disputes and reached a series of consensus, which was confirmed many times in bilateral documents. Since Duterte came to power, the Philippines has changed its focus from arbitration to cooperation, and as a result the China-Philippines relations and relevant cooperation have proceeded smoothly. Second, the two sides should have the willingness to stop unilateral development activities and formulate “provisional arrangements” that do not affect their respective claims. While Duterte has not actively advanced the Philippines' unilateral development, Foreign Minister Cayetano has also publicly stated China and any other country should not develop oil and other natural resources in the area alone.23“Cayetano: Philippines to Declare War if China Crosses Red Line,” Wоrld Nеws (Philippines), May 30,2018, https://worldnews.net.ph/epaper/view/3752/82617.During the South China Sea arbitration, almost all high-level dialogue mechanisms between China and the Philippines were halted. It was after Duterte came to power that the two countries actively explored to restart the mechanisms. The establishment of a special discussion on practical cooperation in the China-Philippines bilateral consultation mechanism on the South China Sea issue initiated by leaders of the two countries is a manifestation of “provisional arrangements.”

In summary, at this stage, the Philippine government has adopted a positive attitude toward joint development. As long as the domestic political situation remains relatively stable in the Philippines, the China-Philippines joint development in the South China Sea may make breakthroughs. Many Philippine scholars have expressed their understanding and support for joint development with China in the South China Sea. For example, Lucio Blanco Pitlo III has pointed out that the Philippines should not exclude cooperation with Chinese companies since joint development does not involve settlement of disputes. According to relevant domestic laws, the Philippine government can directly initiate open tendering process, authorize companies at home and abroad to participate in bidding, and cooperate in the form of service contracts to reduce domestic resistance.24Lucio Вlanco Pitlo, “Joint Development in the ‘West Philippine Sea' Analysis,” Eurаsiа Rеviеw, March 21, 2018, http://www.eurasiareview.com/21032018-joint-development-in-the-west-philippine-sea-analysis.However, there are still many negative voices in the Philippines, with reasons mainly coming from two aspects. First, joint development may violate domestic laws in the Philippines. According to relevant Philippine laws and regulations, the exploration, development and utilization of natural resources in its EEZ shall be under overall control and supervision of the state; and the Philippines must hold at least 60 percent of the shares in the joint development of resources. Second, the Philippines has not gained enough “benefits.” Some Philippine scholars believe that although China has conditionally allowed fishermen of the Philippines to return to the fishing areas of Huangyan Island (Scarborough Shoal), this only achievement of the current government is far from enough for the Philippines to agree to jointly develop oil and gas resources with China in the Philippine EEZ.25Prashanth Parameswaran, “The Danger of China-Philippines South China Sea Joint Development,”Тhе Diрlоmаt, July 27, 2017, https://thediplomat.com/2017/07/china-philippine-south-china-sea-jointdevelopment-visit.Given this, it has been suggested that the Philippine government authorize its own oil company to set up a special subsidiary for Block SC72, and then invite China to take a joint venture. However, this is tantamount to demanding China's indirect recognition of the Philippines' sovereignty rights, which China will obviously find unacceptable. It is also suggested that Duterte directly amend the Constitution and other relevant laws, allowing other countries to participate in hydrocarbon resources development in the Philippines' EEZ and reduce the barriers to entry, but this proposal also faces considerable domestic resistance.26Aaron Jed Rabena, “Feature: Duterte's Push for Joint Eхploration in the South China Sea,” Offshоrе Wоrld, February 1, 2018, https://www.bairdmaritime.com/work-boat-world/offshore-world/ 1514-featureduterte-s-push-for-joint-exploration-in-the-south-china-sea.

China has always taken a positive attitude toward promoting joint development of oil and gas resources with the Philippines in the South China Sea, as reflected in the consultation process between the two countries, but the key lies in the willingness of the Philippine government. In the early period of the Arroyo administration, the Philippines, benefiting from the signing of the Declaration on the Conduct of Parties in the South China Sea(DOC) and the sound development of bilateral relations, the Philippines was able to respond positively to China's proposal of jointly developing South China Sea hydrocarbon resources and signed the Agreement for Joint Marine Seismic Undertaking in Certain Areas in the South China Sea. The Aquino administration, however, pursued a “one-sided” policy in diplomacy,actively following the US Asia-Pacific policy and repeatedly hyping up the South China Sea issue, which caused China-Philippines relations to plunge to lowest point. After Duterte took office, the bilateral relations quickly returned to normal and the two sides have since reached consensus on joint development.

Thoughts on China-Philippines Cooperation in Joint Development

Under the background of stabilizing situation in the South China Sea and a better regional atmosphere for cooperation, China and the Philippines should seize opportunities to accelerate joint development of hydrocarbon resources, and achieve early harvests as soon as possible.

Maintaining a relatively stable situation in the South China Sea and good bilateral relations are prerequisites for promoting joint development of hydrocarbon resources.Objectively speaking, it is the improvement in bilateral relations since late 2016 and the relative stability of the South China Sea situation that made China and the Philippines able to conduct consultations on South China Sea joint development at this stage.Especially in the recent period, with the joint efforts of China and ASEAN countries, the South China Sea situation has obviously cooled down and stabilized compared with the tension during the South China Sea arbitration.The parties concerned have gradually returned to the right track of resolving disputes through negotiation. China and ASEAN countries are not only actively working hard to fully implement the DOC, but have also recently reached agreement on a single draft negotiating text of the COC, which has formed a common will to maintain peace and stability in the South China Sea. These will all create favorable atmosphere for further pragmatic maritime cooperation at the next stage. Admittedly joint development cannot completely resolve disputes between the countries concerned, but through such consultation and cooperation it can effectively reduce hostility between the parties and the probability of conflict, and promote regional peace and stability.27Emily Meierding, “Joint Development in the South China Sea: Eхploring the Prospects of Oil and Gas Cooperation between Rivals,” Enеrgу Rеsеаrсh & Sосiаl Sсiеnсе, Vol.2, 2017, p.69.

Grasping favorable opportunities and selecting appropriate areas are key to making breakthroughs in joint development.The continued growth in energy demand is a critical driver of the willingness of all parties involved in the dispute to negotiate for joint development.On one hand, from the perspective of energy consumption structure of China and the Philippines, both countries' dependence on foreign energy supplies is increasing year by year. Facing relatively high pressure from crude oil imports, the two countries hope to get rid of excessive dependence on the international energy market through independent exploration and development. On the other hand, the international crude oil price is currently stable at around $65 per barrel, which is only slightly higher than the worldwide average cost of offshore oil and gas exploration,which is $58 per barrel. Therefore, the motivation is insufficient for any party to unilaterally advance hydrocarbon development in the South China Sea, and major Western oil and gas companies are generally unwilling to get involved.28Kang Lin and Liu Gang, “How to Promote Joint Development of Oil and Gas Resources in the South China Sea,” Wоrld Аffаirs, No.20, 2016, p.33.Considering the current China-Philippines relations and the Philippines' positive attitude toward joint development,it will undoubtedly be a major breakthrough in the South China Sea joint development if the two countries sign a formal cooperation agreement in the near future.29“Chinese Leader to Visit the Philippines within the Year,” Wоrld Nеws (Philippines), August 10, 2018,https://worldnews.net.ph/epaper/view/4349/86271.

For the choice of jointly developed locations, the delineation of a clear disputed area will facilitate the achievement of a joint development agreement while not affecting the parties' respective claims.30R. Вeckman, C. Schofield, I. Townsend-Gault, T. Davenport and L. Вernard, “Factors Conducive to Joint Development in Asia - Lessons Learned for the South China Sea,” in Веуоnd Теrritоriаl Disрutеs in thе Sоuth Сhinа Sеа: Lеgаl Frаmеwоrks fоr thе Jоint Dеvеlорmеnt оf Hуdrосаrbоn Rеsоurсеs, United Kingdom: Edward Elgar, 2013, p.425.In the short term, as the Philippines has announced Block SC57 as a potential area for joint development with China, a breakthrough is likely to be made first in this area. In the long run, however, since the block is located outside the nine-dash line and China's participation in the development is mainly aimed at accumulating mutual trust instead of jointly developing disputed areas, it is the long-term goal of the two countries to identify a disputed area for joint development. Geographically, Liyuetan Basin is the most suitable place with potential for joint development of hydrocarbon resources.31Zou Keyuan, “Joint Development in the South China Sea: A New Approach,” Тhе Intеrnаtiоnаl Jоurnаl оf Mаrinе аnd Соаstаl Lаw, No.1, 2006, p.99.Specifically, Block SC72 is completely located in the basin, and the three parties of China, the Philippines and Vietnam have conducted early threedimensional seismic exploration of the block in 2005-08 and accumulated rich data therefrom. It should be noted that since the Philippines has granted the service contract for Block SC72 to the Forum Energy Technologies UK through open tendering, China and the Philippines must handle the issue of“pre-existing rights” before promoting joint development of the block.

Institutionalized consultation is an effective means to ensure actual progress of joint development.In the opinion of some Vietnamese scholars,the slow progress in joint development in recent years is due to the absence of a direct linkage with existing mechanisms by the parties concerned and the designation of joint development as a regular issue.32Truong-Minh Vu and Huynh Tam Sang, “Joint Development Possibilities in the South China Sea: A Vietnamese Perspective,” Eаst Аsiаn Pоliсу, Vol.6, No.2, 2014, pp.117-119.In fact, early in the DOC signed in 2002, relevant parties had explicitly announced marine environmental protection, marine scientific research, maritime navigation and traffic safety as areas to explore or conduct cooperation. Should the South China Sea situation maintain good momentum, it is entirely worthy of consideration to incorporate the issue of joint development of hydrocarbon resources in the senior-official mechanism on implementing the DOC. At the same time, the China-Philippines bilateral consultation mechanism on the South China Sea issue is also an effective way to promote joint development. In particular, at the second meeting, the two sides exchanged views on how to carry out marine hydrocarbon cooperation, and clarified that such cooperation would not lead to prejudice to their respective positions on sovereignty, sovereign rights, and jurisdiction.33“Joint Press Release Second Meeting of China-Philippines Вilateral Consultation Mechanism on the South China Sea,” Chinese Ministry of Foreign Affairs, February 13, 2018, https://www.fmprc.gov.cn/mfa_eng/wjbхw/t1534824.shtml.

A flexible business cooperation model is necessary to promote joint development.In order to attract other countries to participate in the development of its Hong Ngoc (Ruby) field, Vietnam allowed Malaysia's Petronas to possess 85 percent of the block's shares.34Kang Lin, Chen Хiangmiao and Wan Qiubo, “A Вrief Introduction to Vietnam's Oil and Gas Eхploration in the South China Sea in 2009-2012,” Pасifiс Jоurnаl, No.1, 2016, p. 90.Similarly,upon the Philippines' request with regard to shares, China can consider concession based on fairness and reciprocity. For example, in the early stage of cooperation, China can agree to a 40-60 division of profits between China and the Philippines, which is a “provisional arrangement” of joint development without prejudice to the two sides' respective claims and positions, to dispel the Philippines' misgivings about a Chinese control,reduce resistance against promoting cooperation, and facilitate breakthroughs in joint development with the Philippines as soon as possible.

Eliminating external interference is an important guarantee for promoting joint development.The China-Philippines joint development is after all a matter between the two countries and requires a favorable external environment to avoid interference from other forces. Experiences have shown that inappropriate actions and intervention by individual external countries often lead to the stall of joint development process. Therefore, political consensus between China and the Philippines is necessary to eliminate possible external interference. The two countries also need to discipline themselves and correctly guide public opinion. In particular, China should pay attention to the opposing voices in the Philippines. Not long ago, some Philippine political forces deliberately hyped up the joint scientific research in the Benham Rise area, depicting the cooperation, which does not involve any disputed areas, as the selling of Philippine interests to China. This led the Philippine government to announce a ban on all foreign scientific research projects in the waters.

Maintaining strategic perseverance and patience will enable joint development to be stable and long-lasting.Joint development in the South China Sea is aimed to promote cooperation in exploiting energy resources,but it cannot be rushed; otherwise it will affect regional stability.35Leszek Вuszynski and Iskandar Sazlan, “Maritime Claims and Energy Cooperation in the South China Sea,” Соntеmроrаrу Sоuthеаst Аsiа, No.1, 2007, p.166.In the long run, a peaceful and stable South China Sea is in the common interests of all parties. Therefore, in dealing with the issue of China-Philippines joint development, it is necessary to maintain sufficient patience and perseverance,and steadily advance the negotiation process to ensure that bilateral relations and the South China Sea situation will not thus be affected.