Philippines signs emergency oil access pacts with Indonesia, Thailand

The Philippines signed preliminary agreements on Saturday to explore emergency access to oil stored in Indonesia and Thailand, as Southeast Asian governments look for ways to shield fuel supplies from Middle East disruptions.

State-run PNOC Exploration Corp. signed separate letters of intent with Indonesia's Interport Mandiri Utama and the Shell Company of Thailand Ltd. on the sidelines of the ASEAN Business and Investment Summit in Manila, according to Arab News. The summit precedes the ASEAN leaders' meeting that Manila hosts from Sunday.

Nikkei Asia reported that companies from the Philippines, Indonesia and Thailand signed deals to study arrangements for tapping petroleum product reserves in emergencies. The agreements involve the Economic Research Institute for ASEAN and East Asia and the Indonesian Business Council as knowledge partners, Arab News reported, citing ERIA.

ERIA said the projects would examine "oil ticketing mechanisms," including the possible use of existing storage facilities in Indonesia and Thailand to support supply security and emergency preparedness in the Philippines. Under such a system, a participating entity pays for the right to access oil held in another country's storage in an emergency, reducing the need to build new tanks and buy extra stocks upfront, according to ERIA. The system is used in the European Union and would be the first of its kind in ASEAN, Arab News reported.

The Diplomat described the plan as a Japan-backed scheme to create a ticket system for emergency fuel reserves similar to the EU's. The Japan Times reported that Japan and the Philippines are due to sign a deal under which Japan will help the Philippines develop a national oil reserve system.

Arab News reported that the agreements aim to strengthen energy security against supply disruptions from the Middle East triggered by the US-Israeli war on Iran. The Philippines imports 98 percent of its oil from the Gulf and has been in a state of energy emergency since March, Arab News reported. Arab News reported that the Philippines was the first country to take that step in response to the war on Iran, which drove up local fuel prices.

President Ferdinand Marcos Jr. has called for a regional study on joint oil stockpiling, according to ERIA. The 11-member Association of Southeast Asian Nations faces "increasing exposure to oil supply disruptions amid geopolitical uncertainties and growing dependence on imported oil," ERIA said. Arab News, citing Nikkei, reported that Laos and East Timor are considering participating as well.

Manila is also discussing the proposed Philippine Strategic Petroleum Reserve Act, a draft law to establish the country's first state-owned oil reserve, Arab News reported. Noel M. Baga, an energy lawyer and professor at the University of the Philippines, told Arab News that building the reserve should be the priority because it would hold at least 60 days of fuel supply and the measure would establish more refineries.

"Only adequate oil storage facilities and oil refineries inside the Philippines itself can truly ensure the country's energy security, reduce dependence on oil imports, and reduce oil prices," Baga told Arab News. "Philippine energy independence is a must."