UPDATE 1-Philippine South China Sea gas find may fuel China tensions

Tue Apr 24, 2012 11:48am BST

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(Adds jump in Philex Petroleum shares; official's comments)

By Erik dela Cruz and Manuel Mogato

MANILA, April 24 (Reuters) - A Philippine exploration firm has found more-than-expected natural gas in a disputed area of the South China Sea, a discovery likely to inflame territorial tensions with China.

Philex Petroleum Corp said in a disclosure to the stock exchange on Tuesday that its u nit, Forum Energy Plc , "is expected to show an improvement in the resources previously known" in the Sampaguita gas discovery in the Reed Bank.

The area is claimed by both nations and last year Chinese navy vessels tried to ram one of Forum Energy's survey ships there, almost halting its research w o rk.

China has territorial disputes with the Philippines, Vietnam, Brunei, Malaysia and Taiwan across the South China Sea, and these nations are worried about what some see as growing Chinese assertiveness in staking claims over the sea's islands, reefs and shoals.

The territorial disputes are pushing the Philippines to seek closer cooperation with the United States, which has drawn Chinese condemnation.

A 2006 study quoted by Forum Energy said the Sampaguita field had a potential of up to 20 trillion cubic feet of natural gas, or more than five times initial estimates.

Energy Secretary Jose Rene Almendras said the findings could support plans to build a multi-million dollar pipeline from the area to Manila.

"If it's true and it's big, then hopefully the resources will help us face the need for energy in the future," Almendras said in an interview with local TV network ANC.

DISPUTES

The Sampaguita gas field is near the Malampaya gas field, with about 2.7 trillion cubic feet of natural gas, and which supplies fuel to three power plants for the main Luzon island

Philex Petroleum shares jumped 17.4 percent to a record high after the disclosure in trading that was the heaviest in volume since the company was listed last September.

The Philippines is locked in several disputes with China in the South China Sea, and Manila is expected to award 15 oil and gas exploration contracts for sites in the area in July. Two of those sites are contested by China.

In recent weeks, Philippine and Chinese ships have faced off near the Scarborough Shoal in waters believed to be rich in oil and gas.

Lieutenant-General Anthony Alcantara, commander of military forces in the area, said a Philippine coast guard ship would stay in the area to assert the country's sovereignty and protect Filipino fishermen.

The People's Liberation Army (PLA) of China has warned that friction with the Philippines could escalate into armed conflict unless the United States helps rein in Manila.

While those threats do not amount to definitive government policy, they underscore domestic pressures on Beijing to take a stronger position against the Philippines and other claimants. (Additional reporting by Chris Buckley in BEIJING and Rosemarie Francisco in MANILA; Editing by Miral Fahmy)