Speaking in the southern city of Davao before members of the Philippine Coast Guard Auxiliary, Duterte said he had told Beijing leader Xi Jinping that he wanted to drill in the disputed area, which is believed to sit atop vast mineral deposits.
"We intend to drill oil there, if it's yours, well, that's your view, but my view is I can drill the oil, if there is some inside the bowels of the earth because it is ours," Duterte said in a nationally televised speech.
He said the Chinese leader told him, "We're friends, we don't want to quarrel with you. We want to maintain the presence of warm relationship, but if you force the issue, we'll go to war."
"What can I say then?" Duterte said.
He said he insisted the United Nations-backed Permanent Court of Arbitration in The Hague ruled in favor of Manila last year, something China said both countries would eventually have to talk about.
Duterte said Xi told him they would eventually talk about the ruling. "But it cannot be done now," he said, quoting the Chinese leader.
Duterte's statement comes as China and the 10-nation Association of Southeast Asian Nations (ASEAN) agreed Thursday to a draft framework of a code of conduct to govern actions in the region during a meeting in the southern city of Guiyang, China.
"The Philippines welcomes the finalization by ASEAN and China's senior officials of the draft of the framework of the code of conduct," the Philippine foreign ministry said in a statement Friday.
It did not give details, only that the document was completed ahead of the mid-2017 goal set by leaders of ASEAN and China. It "contains elements which the parties have agreed upon," the statement said, without elaborating.
"The draft framework will be presented to the foreign ministers of ASEAN and China at their post-ministerial conference in Manila in August 2017 for their consideration," it said.
The Philippines "reaffirms its commitment to working toward an effective code of conduct for the South China Sea," the statement said.
China ignored The Hauge ruling in July 2016 that effectively invalidated most of its South China Sea claims, three years after Manila filed a case.
Duterte has been downplaying the ruling as he seeks an alliance with China and distances the country from its traditional ally, the United States, with which it is bound by a decades-long mutual defense treaty.
A war with China would "result to massacre and it will destroy everything," Duterte said.
China and ASEAN agreed 15 years ago to sign a code of conduct. But progress has been slow and often marred by disputes over claims by Beijing to almost the entire sea, including waters close to shores of the other claimants.
Malaysia, Vietnam, Brunei and Chinese rival Taiwan have their own claims in the South China Sea.
Chinese Embassy officials were not immediately available to comment Friday.
Reported by BenarNews, an RFA-affiliated online news service.
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