Iran’s closure of the Strait of Hormuz could reignite cooperation between rivals halfway around the world to develop oil and gas in the South China Sea, experts told Radio Free Asia.
But any cooperation between China and the Philippines to explore underwater oil reserves in disputed waters would be preparation for the next energy crisis, not a solution to the current crisis, experts said.
This week’s talks between the two sides showed “positive progress”, Beijing’s embassy in Manila said in a statement on Thursday, urging both sides to “put aside their differences and pursue common development”.
Philippine officials, for their part, confirmed that no joint activities had begun, but could do so in the future if negotiations were successful.
This renewed commitment comes amid disruptions in the Strait of Hormuz, a major shipping channel through which a fifth of the world’s oil and gas flows.
These disruptions have increased concerns about energy security in Asia, where many economies rely heavily on imports from the Middle East.
Out of gas
The Philippines is under pressure to find new energy sources due to declining production from its Malampaya gas field, which provides a significant share of the country’s electricity.
For Manila, the South China Sea has long been seen as a potential alternative energy source.
The U.S. Energy Information Administration estimates that the region holds about 11 billion barrels of oil and 190 trillion cubic feet of natural gas.
But Beijing claims almost the entire South China Sea and all the energy resources there, including in areas also claimed by Manila. Parts of the sea are also claimed by Vietnam, Malaysia, Brunei, Taiwan and Indonesia.
Sometimes competing claims can lead to violent clashes, such as in June 2024, when Chinese coast guard ships, according to Philippine officials, rammed supply ships near the Second Thomas Shoal, a reef that has become a hotspot in the area claimed by both countries.
A Filipino sailor lost a finger in the incident and at least seven others were injured, officials said.
Unrest and instability in the region are one of the main reasons why its energy resources remain untapped.
Although analysts say the war in Iran is likely to draw more attention to these resources, it will not necessarily accelerate their development.
Delayed gratification
“The disruptions in Hormuz are already drawing attention to the South China Sea, but as a strategic cover rather than a practical substitute,” Sylwia M. Gorska, a doctoral student in international relations at the University of Lancashire in the United Kingdom, told RFA.
She said that because of the importance of the strait to global gas supplies, a disruption can create enough volatility to force governments to do what they can to reopen it rather than looking for gas elsewhere.
“The key question is not whether the strait is officially open, but whether energy can pass through it reliably and at an acceptable cost,” she said.
Gorska said the loss of supply cannot simply be replaced by new sources of oil in the South China Sea, as developing that area would require years of stable operating conditions and significant capital investment.
“The real constraint is not whether the resources exist, but whether they can be transformed into supplies,” Gorska said, pointing to legal uncertainty, operational risks and the lack of stable investment conditions in the South China Sea region.
Large offshore oil reserves are unlikely to provide the near-term relief needed to deal with Hormuz-induced shocks to the system, Aadil Brar, a Taipei-based independent analyst and former visiting scholar at National Chengchi University, told RFA.
“Hormuz was transporting 20 million barrels of oil per day,” he said. But in the South China Sea, “transforming gas deposits into real supplies? That represents 5 to 10 years of drilling, pipelines and $10 billion in investments.”
“It’s a protection against the next crisis, not a solution to this one.”
Competition remains fierce
“Even if incentives to cooperate increase on paper, behaviors remain competitive,” Gorska said, referring to previous attempts at cooperation between Manila and Beijing that faced significant obstacles.
A 2018 agreement between the Philippines and China on joint exploration resulted in no joint projects and was later terminated, while constitutional limits on foreign participation – strengthened by a ruling by the Philippine Supreme Court in 2023 – remain a major constraint.
International law does, however, provide for joint development agreements, Brar said, but he acknowledged that implementing them remains difficult in practice.
“Trust is thin and power is unequal,” he said, noting that previous cooperative efforts had not been smooth. “It’s been more of a shove than a push together.”
Edited by Eugene Whong.