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Duterte Ends China Oil Talks, Leaving Any Restart to Marcos

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(Bloomberg) -- Outgoing Philippine President Rodrigo Duterte has ended talks with China on oil exploration in the disputed South China Sea, his top envoy said, posing a challenge for incoming leader Ferdinand Marcos Jr. if he wishes to restart discussions. Related stocks fell.

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“We got as far as it is constitutionally possible to go,” said Foreign Affairs Secretary Teodoro Locsin, whose term ends with Duterte on June 30. “One step forward from where we stood on the edge of the abyss is a drop into constitutional crisis.”

Philippine oil driller PXP Energy Corp., which has service contracts in the South China Sea, closed 6.7% lower on Friday, its biggest drop in two months and bucking the local benchmark stock index’s 2.5% rise. Its parent Philex Mining Corp. also fell 11.5%, the most since February 2017. PXP said in April that it had been ordered by the government to halt activities in the contested waters.

China and the Philippines have been trying to strike a deal on energy resources in the disputed area since signing an initial agreement in November 2018. Sea tensions between the two nations have also risen in the past weeks, with the Philippines’ protesting Beijing’s presence in the disputed area, as well as accusing China of illegal fishing and shadowing of Filipinos’ boats.

China is ready to work with Marcos’s government to advance oil exploration talks, Foreign Ministry spokesman Wang Wenbin said at a briefing in Beijing Friday, adding that discussions made “important progress.”

Marcos has said his incoming government will work with China, describing ties between the two nations as “advantageous.” But he has has also said he will not compromise Philippine sovereignty.

(Adds stock moves, China Foreign Ministry’s comments from 3rd paragraph.)

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