The protracted wrangling between the Philippines and China over contested waters in the South China Sea could be smoothed by the joint development of the potentially giant Sampaguita gas field, according to research organisation Grenatec.

Operator Forum Energy has already received an extension to drill two appraisal wells on Sampaguita, which is located off the island of Palawan in Service Contract 72 and which was awarded by the Philippines.

However, force majeure has since been declared over this Reed Bank block as China has contested its sovereignty, leading the Philippines to apply for a UN ruling.

“Forum Energy has been negotiating with China National Offshore Oil Company (CNOOC) to develop Sampaguita,” said Grenatec.

Upstream earlier reported that CNOOC had held talks with Philex Corporation, Forum’s major shareholder, on potential joint exploration on SC 72.

“By itself, Forum Energy doesn’t have the technology or the money to develop Sampaguita. CNOOC and China do,” added Grenatec.Forum approached CNOOC directly about some form of collaboration in the disputed area, said sources. It is understood that to date there has been no official approach at a government-to-government level.

Both China and the Philippines have hydrographically mapped the Reed Bank area, which is home to Sampaguita and potentially other gas structures.

Grenatec reckons that SC 72 could hold as much as 20 trillion cubic feet of gas, while Weatherford Petroleum Consultants estimated Sampaguita to have 2.6 Tcf of contingent in-place gas resources and 5.5 Tcf of prospective in-place gas resources.

Three wells have so far been drilled on Sampaguita, all at the south-western end of the structure, and two of these tested at 3.2 million and 3.6 million cubic feet per day of gas respectively.

The Philippines relies heavily on gas produced from Shell’s Malampaya field to the north-east of SC 72, which accounts for about one-third of energy demand. However, output from that deep-water field is expected to end within a decade. Shell and its partners are understood to have plans to explore nearby but will not proceed unless they have a new contract to replace SC 38 from 2024.

Gas from Sampaguita could be exploited via an extension pipeline to tie into the existing Malampaya 504-kilometre gas pipeline to Batangas on the Philippines island of Luzon.

The Philippines has applied for arbitration to resolve the South China Sea maritime waters dispute to the United Nations Convention on the Law of the Sea (UNCLOS) and the decision could come as early as August, said a source.

China and the Philippines are both signatories to UNCLOS.

However, even if the tribunal rules in the Philippines’ favour there will be no effective way of enforcing the decision.

Grenatec is a research organisation studying the viability of a Pan-Asian energy infrastructure.

The disputed South China Sea areas encompass producing fields and exploration acreage, including many frontier areas with hydrocarbon potential that could be explored were the contesting parties able to agree sovereignty, or agree to joint operations.

The Manila and Beijing governments have long disagreed over areas of the South China Sea, and China has objected to some offshore blocks offered in Philippine licensing rounds.

Sampaguita offers a unique opportunity to establish a joint development area in the South China Sea and could herald a new wave of collaboration in the region, according to Grenatec.

“As the South China Sea’s most promising near-term developable gas field, joint development of Sampaguita could set a precedent for the whole region,” Grenatec said.

“A similar near-term, confidence-building opportunity with benefits all around does not exist elsewhere in the South China Sea. Agreeing to joint development would yield diplomatic, financial, economic and energy benefits for everyone.”

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Sampaguita field could be key to solve dispute