“We were asked to stop all activities because the president will be talking to Xi Jinping,” said Manuel Pangilinan, chairman of PXP Energy, the parent company of the service contract holder on the resource-rich Reed Bank.
The Philippine government has yet to notify PXP when it will be able to resume operations, the tycoon told reporters on Friday.
The episode illustrates how the territorial spat in the South China Sea has complicated relations between Manila and Beijing, and the ongoing dispute is expected to be the most pressing foreign policy issue for the winner of Monday’s presidential election.
“There is no question that the maritime row will continue to challenge Philippine-China relations,” said Lucio Pitlo, research fellow with the Asia-Pacific Pathways to Progress Foundation in Manila.
Under his presidency, Duterte shifted the Philippines closer to China and threatened to break Manila’s long-standing treaty alliance with Washington, which had been critical of his bloody war on drugs.
In return, China rewarded Duterte with greater market access for Philippine agricultural products and pledged billions of dollars in credit and investments, mostly for infrastructure. But to date, only a fraction of the promises have materialised.
Duterte initially put on the back burner the Philippine arbitration victory at The Hague in 2016 that repudiated Beijing’s expansionist claims in the South China Sea — expanses of which are also claimed by Brunei, Malaysia, Taiwan and Vietnam.
In 2018, Xi and Duterte agreed to pursue joint oil and exploration projects in disputed waters.
Duterte did, however, end up invoking the arbitration victory, while the foreign ministry formally protested incidents such as Chinese vessels pointing “radar gun” and spraying water cannons on Philippine ships.
In a 2019 national address, Duterte described the situation in the South China Sea as a “delicate balancing act”. His successor will likely face the same predicament, even as the two leading contenders to replace him see the world differently.
Ferdinand Marcos Jr has opened up a wide lead in pre-election opinion polls and inclines toward continuing Duterte’s friendly stance on China. The son and namesake of the late dictator favours bilateral talks on the issue — a policy that Beijing also advocates. “We must engage, there’s no other way,” Marcos has said.
Meanwhile, vice president Leni Robredo, who lies in second place, plans “to strengthen Manila’s engagement with allies and like-minded nations” in the face of the maritime row that has seen China create and militarising artificial islands.
“Manila should continue to protest and push back against Chinese incursions and status quo-changing activities in the West Philippine Sea while managing sea incidents so as not to affect broader bilateral relations,” Pitlo said. “But at the same time, it should leverage alliances and partnerships and the 2016 arbitration award to enhance its negotiation position.”
After previously threatening to terminate the Visiting Forces Agreement that facilitates American troops’ entry into the Philippines, Duterte decided in July last year to carry on with the pact. Its abrogation, analysts say, would have impaired the 1951 Mutual Defense Treaty, the bedrock of the nations’ alliance.
Last month, US and Philippine forces staged a major joint military exercise in which nearly 9,000 troops participated.
But on the last day of nearly two weeks of war games, which included maritime security drills, Xi and Duterte hailed the strength of bilateral relations on their watches.
Xi said that proper handling of the South China Sea issue by the two sides provides an important foundation for friendly cooperation that has effectively safeguarded regional peace and stability, according Xinhua, Beijing’s official news organisation.
Duterte’s office went along with that assessment. “The leaders stressed the need to exert all efforts to maintain peace, security and stability in the South China Sea by exercising restraint, dissipating tensions and working on a mutually agreeable framework for functional cooperation,” it said in a statement.
Beyond diplomacy lies uncertainty. PXP has spent US$2 million on the suspended exploration work, and its share price on the national stock exchange plunged 15% as investors waited for further developments.
Philippine Defense Secretary Delfin Lorenzana signalled last month that any progress will depend on Duterte’s successor, despite PXP’s contract being awarded prior to Xi and Duterte’s 2018 agreement on joint oil and gas exploration.
“The president said we’ll just leave it to the next administration on how to deal with the joint exploration,” Lorenzana told reporters last week.