The resource-rich Philippines is doubling up development of its own fuel sources as world oil price hikes hit the largely impoverished population.
On October 17, Philippine President Rodrigo Duterte signed a service contract with the Israeli energy exploration firm Ratio Petroleum to scout for fuel under the South China Sea, the Department of Energy in Manila said. It is the first Philippine-foreign energy contract signed since 2013.
The Philippines is talking separately with China, despite a maritime sovereignty dispute, about another joint exploration deal.
Pursuit of joint exploration with foreign countries reflects not only a lack of technological expertise in the Philippines to exploit its own undersea fuel reserves, but also an urgency to find that fuel, experts believe.
“It’s ideal to probably have a good source of oil,” said Jonathan Ravelas, chief market strategist with Banco de Oro UniBank in Metro Manila. “It would be ideal if we can be self-sufficient. It would save money given the rising oil price.”
Oil price hikes have rippled around the world this year but hit the Philippines especially hard because food staples such as rice have suddenly started costing more at the same time. Inflation was 6.4 percent August, the highest in Southeast Asia, and 6.7 percent in September.
About one-fifth of the 100 million-plus Philippine population lives in poverty, meaning some feel a pinch when they get gasoline for their motorcycles or buy tickets for public transport.
Duterte, an otherwise popular president, saw his net trust rating fall from 75 to 57 points from December through June in part because of inflation, analysts believe.
Prices for Brent crude oil hit $78.90 per barrel on the world market in September, up from $72.50 a month earlier, for a 40 percent increase over the previous year. Sino-U.S. trade disputes and a cut in oil export loading by Iran have driven the increases.
“The President has been very clear – our country needs to attain energy security and sustainability at the soonest possible time,” energy department Secretary Alfonso Cusi said via his department’s website last week.
“We are currently experiencing how our dependence on importation has left us at the mercy of price movements in the global oil markets,” he said. “We need to boost the exploration and development of our own energy resources and the awarding of the petroleum service contract to Ratio Petroleum is a step in the right direction.”
The Philippines controls untapped fuel deposits estimated at $26.3 trillion, the state-run Philippine News Agency said in February, calling that amount “more than enough to free the country from the shackles of poverty.”
But its contractors lack the exploitation expertise available in Western countries, analysts believe. In Asia, Vietnam and Myanmar also rely on foreign partners to tap fuel under the sea.
“Often these frontier economies don’t have good capabilities in that area,” said Rajiv Biswas, executive director and Asia-Pacific chief economist with the research firm IHS Markit.