Philippines says any energy deal in disputed waters must be with Chinese company, not govt

Any potential deals between Manila and Beijing on energyexploration in the South China Sea (which Vietnam calls the East Sea) should be agreed with a company and not the Chinese government, the Philippines' presidential spokesman said on Thursday.

China claims most of the South China Sea, a key route in global trade and resource-rich territory whose parts are subject to competing claims with Brunei, Malaysia, Taiwan, Vietnam and the Philippines.

"We might enter into an agreement with a Chinese-owned corporation, not the Chinese state itself," Harry Roque, the spokesman of President Rodrigo Duterte, told ANC news channel.

The Philippines and China last month agreed to set up a special panel to work out how they can jointly explore oil and gas in part of the South China Sea that both sides lay claim without having to address the touchy issue of sovereignty.

Pursuing a joint project would be extremely complex and sensitive, as sharing oil and gas reserves could be seen as endorsing other countries' claims.

"We are not entering into a sovereign agreement for exploration. It will be an agreement, if we do, between two corporate entities," Roque said.

The Philippines suspended exploration in the Reed Bank in 2014 as it pursued international arbitration over territorial disputes with China.

In 2016, the Permanent Court of Arbitration in the Hague invalidated China's claim over most of the South China Sea, though Beijing refused to recognize the ruling, which spelled out the Philippines' sovereign rights to access offshore oil and gas fields, including the Reed Bank, within its 200 mile Exclusive Economic Zone.

Negotiations are ongoing with a Chinese state-owned company, Roque said, declining to name the entity.

The Philippines, China's CNOOC Ltd and state-owned PetroVietnam jointly surveyed the Reed Bank in 2003 to 2008.

"This will now actually entail joint exploration and possible exploitation of natural resources," Roque said.

However, there are doubts a joint agreement will be approved because China does not favor activities that they have to undertake jointly with other people, Roque said.

Ties with China have warmed under Duterte, who has put aside territorial disputes with Beijing in exchange for trade opportunities and financing in key infrastructure projects.