Oil and Gas in the Capitals

	Vol. 232 No. 2
JEFF MOORE, CONTRIBUTING EDITOR, ASIA-PACIFIC

Philippines addresses Palawan security as oil stakes increase

As E&P increases in the Philippines, so do government security concerns over threats to the oil and gas sector, specifically around potentially oil- and gas-rich Palawan island. The most immediate threat is radical Islamic terrorist groups. Though the Philippine government has taken steps to protect Palawan, it has fewer resources than required, and full security remains lacking.

Oil interests. There is an estimated 11 billion bbl of oil off Palawan. Nido Petroleum has made good progress at small-scale Galoc and Tindalo Fields, and majors Shell and Exxon are joining the hunt for bigger finds. Otto Energy, Kairiki Energy, Trafigura Ventures and TG World have joined the fray. Further discoveries will attract more surveying, drilling and servicing, making ripe targets for terrorist groups such as the Moro National Liberation Front (MNLF), the Moro Islamic Liberation Front (MILF) and the Abu Sayyaf Group (ASG).

The radical Islamic threat. Regarding size, MNLF and MILF—insurgent groups that use terrorist tactics—have thousands of fighters. ASG—a classic terrorist group—has hundreds. All three follow the same general ideology. They want an Islamic republic governed by sharia law to cover certain areas of the Philippines, including Palawan. This ideology drives monthly attacks on government and civilian targets.

On Aug. 19, 2009, for example, Philippine Marines of Western Command’s (Wescom’s) 8th Battalion Landing Team (BLT) fought 30 MNLF fighters on Palawan’s southern Mantaguli Islet at an international resort. MNLF was fleeing a police force serving an arrest warrant to its leaders. In their getaway, they took local civilians hostage in a mosque. Marines assaulted the terrorists, killing seven. The fighting forced 2,000 civilians to flee to adjacent Balabac island.

Aside from engaging in large battles with government troops, MILF regularly targets civilians via bombings, raids and assassinations, mostly on Mindanao island. And while MILF is not currently operating on Palawan, it claims the island as part of its “ancestral domain.” More ominously, in June 2010, MILF publicly stated it was against E&P in the Sulu Sea and off Palawan because it would never benefit its people.

While ASG carries out small attacks on a regular basis, it also has scores of high-profile attacks under its belt. On May 27, 2001, ASG kidnapped 20 foreigners from Dos Palmas Beach Resort in Palawan; they beheaded one of their American captives. ASG also conducted one of the deadliest maritime attacks in history—the Feb. 27, 2004, bombing of the SuperFerry 14, killing more than 100.

In summary, the ideology of MNLF, MILF and ASG puts foreigners—and certainly the oil industry—at risk. They moreover have maritime terror capabilities and/or geographic reach in Palawan. The Philippine government is well aware of the threat. Manila wants to avoid a Nigeria-type situation where guerrillas destroy pipelines and pumping stations and raid offshore vessels and platforms. It does not want Shell, Exxon or Nido to do what Chevron did in Nigeria in December 2010, which was halt 50,000 bpd over pipeline attacks.

Security solutions. The Armed Forces of the Philippines (AFP) in 2010 recognized the need to secure the waters around Palawan. In August, the US donated four rigid-hull inflatable boats to the Philippine National Police-Maritime Group (PNP-MARIG) so it could expand operations from Mindanao to Palawan. The same month, AFP announced that the Marines’ 8th BLT would increase its activities on Palawan and would be joined by the 12th BLT before the end of the year.

Later, on Nov. 18, Wescom sponsored a live exercise between the Navy, 8th BLT and PNP-MARIG to demonstrate its maritime security abilities. Wescom Commander Maj. Gen. Juancho Sabban said, “Basic facilities for maritime protection in these areas are already being established.” His use of the term “basic facilities” indicated that Palawan security was in its infancy.

Infancy indeed. AFP and associated forces know they are undermanned and under-resourced. The Coast Guard has but one gunboat and one patrol vessel for Palawan. It has to coordinate with the Bureau of Fisheries and Aquatic Resources, the PNP and Wescom to carry out its missions. And the Navy, Marine BLTs and PNP need more than just inflatable boats and a handful of readiness exercises to keep terrorists from “pulling a Nigeria” and attacking Nido or Shell facilities. They need more vessels, weaponry, manpower, and navigational and situational awareness technology.

To fill the gaps, Sabban told the Philippine Daily Inquirer in August, he wants Philippine forces to coordinate with oil companies to enhance security. Brig. Gen. Jose Mabanta, Jr., elaborated, suggesting that corporations either donate the use of their helicopters and sea vessels or help AFP acquire such assets.

Such an arrangement would add significantly to the already heavy industrial regimen of E&P companies. But, like it or not, AFP has a point. The radical Islamic terror threat to the E&P community around Palawan is real, and the government has neither the manpower nor the assets to protect it. Energy companies can ignore the risk and let insurance companies deal with the aftermath of an attack; they can absorb the risk by going it alone with internal corporate security; or they can deflect risk by integrating with AFP.

Ultimately, however, achieving a secure E&P environment rests on the shoulders of Manila. Territorial security is a basic state function. And even if the energy companies link with AFP to secure Palawan from radical Islamic terrorists, they will still have to contend with pirates, the communist New People’s Army, and inevitable friction with China, which claims the entire South China Sea and all its oil and gas. In the here and now, however, energy companies operating around Palawan need more than a drilling strategy. They need a professionally designed political-security strategy as well.   WO