At first glance you might be hard-pressed to find anything that Argentina and the Philippines have in common – not even language these days, as Filipino has replaced Spanish as the official language in the Pacific archipelago.

However, from an offshore exploration and development perspective there’s a surprising number of parallels between them. Both have potentially impressive untapped hydrocarbon reserves but have been slow to develop and exploit them, and both are grappling with seemingly intractable territorial disputes.


Currently, most of the country’s oil comes from onshore basins, with offshore exploration and production being at a very early stage, so it’s impossible to give exact figures for what is actually under the sea floor in the two areas of interest, the central-east and Tierra del Fuego regions.

Concessions in these areas not already licensed to private companies are controlled by state-owned energy company Enarsa. In the private sector, Repsol-YPF dominates E&P in Argentina, accounting for about 40% of its oil, although other companies such as Pan American Energy, ChevronTexaco and Petrobras Energía also play a significant part, and nearly all of them have plans to develop offshore fields.

“Argentina has been stung into action by the furore in 2010 surrounding exploration off the coast of the Falkland Islands.”

For example, in February 2011, a joint venture between YPF, Petrobras and Pan American Energy was due to begin exploration in the Malvinas basin, about 300km off the coast of Tierra del Fuego, in what is reported to be the country’s largest offshore project to date.

Arguably, Argentina has been stung into action by the furore in 2010 surrounding exploration off the coast of the Falkland Islands (or the Malvinas to the Argentines) by UK companies such as Desire Petroleum and Rockhopper Group, particularly since Rockhopper reported in September 2010 that its Sea Lion well in the North Falkland Basin has recoverable reserves estimated at more than 240m barrels.

The drilling has led to fresh tension between Argentina and the UK, with Argentina effectively closing its ports to shipping bound for the islands – a move designed to discourage operations there by making them more complicated logistically and more expensive, especially given its remoteness from the UK and lack of oil infrastructure at the moment.

But then some analysts argue that Argentina has only itself to blame for this late start. Asset seizures by the Argentine government have forced capital out of the country, which in effect has starved the domestic industry of much-needed R&D funding for the finding of new reserves.

As a result, production has been declining for the past few years – in 2009 alone, for example, it fell 0.7% to about 676,000bpd on 2008, according to the latest BP Statistical Energy Survey. Compare that with its neighbour Brazil, where in the same period it grew by 7.1% to 2,029,000bpd.

The country’s system of export taxes has also kept domestic oil prices artificially low, which has deterred some of the larger oil companies from investing in offshore exploration. As Buenos Aires-based energy consultant Daniel Montamat told the New York Times in 2010, “If you don’t have stable rules and prices that can make offshore investment profitable, then companies are going to go to other geological regions to explore.

“There are very few companies exploring the Argentine sea – there should be a lot more.”

The Philippines

The Philippines has four areas of interest – the South China Sea, the Celebes Sea, the Sulu Sea and the Philippine Sea, beyond which is the north Pacific.

Oil exploration in the Philippines only began in the late 1990s, and despite its waters offering some of the richest potential reserves in the world, the country’s production still lags way behind that of its neighbours. As Razeen Khalid, Asia Pacific program manager of the Energy & Power Systems Practice at consultancy Frost & Sullivan explains, “For now, only the South China Sea is being heavily explored, developed and produced (by eastern-side APAC countries), with the Philippines producing the least – 80% of its production comes from the Palawan Basin but even then its national production is still below 30,000bpd.”

Given that its consumption is an estimated 315,000bpd, according to the US government’s CIA World Factbook, the country is therefore a net importer.

Khalid does not see this situation changing for some time. “In the Celebes Sea there’s some potential for deepwater exploration but Malaysia and Indonesia are still debating acreages. There’s no new development in sight in the Sulu Sea,” he says (a service contract was awarded in 2005 to Malaysian company Ranhill), “while the Philippine Sea / north Pacific is still an untapped boundary, the obvious reason being the massive logistical challenges due to distance from land and the issue of acreage ownership.”

This issue of ownership bedevils the Philippines. In his latest book, Where in the world is the Philippines? (Debating Its National Territory), former Asean secretary-general Rodolfo Severino says, “Philippine law-enforcement agencies have not been sure of what to allow and what to prohibit where… The Philippines has been unable to negotiate with neighbours on overlapping maritime jurisdictions on anything like a sound footing.”

“There are, however, some recent developments that offer brighter prospects.”

These have consequences for the availability of energy resources, he says, and as regards agreeing on territory in the South China Sea – the most disputed area in the region – he says, “It is highly unlikely that the jurisdictional disputes in the South China Sea will be resolved anytime soon, if ever.”

There are, however, some recent developments that offer brighter prospects. The first was the announcement in January 2011 by President Aquino of an area of Palawan that could hold oil reserves to rival those in Iraq. Reports do say though that exploration is still at the seismic study stage.

Also in January, Energy Undersecretary Jose Layug Jr announced that the Department of Energy is proposing a new petroleum exploration law that provides for more incentives than the existing, Marcos-era law, which grants incentives to oil producers including exemption from all taxes except income tax, payment of income tax from the 60% of net revenues that is the government’s share, and recovery of some costs. Early but still turbulent days therefore, for both regions, but for companies with the will to open up these new frontiers the pickings look to be very rich.