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Tectonically the islands of Palau are an uplifted island arc that initially developed in the Eocene in response to subduction to the west in the Ryuku trench. This was at the collision boundary of the Philippine tectonic plate below the Eurasian plate.
Palau lies on the Kyushu-Palau ridge which is uplifted oceanic crust within the Philippines plate. The archipelago is a remnant of a large coral reef on this volcanic ridge. The islands are thus volcanic-cored with varying amounts of fringing limestone reefs. Globalshift believes the islands and surrounding waters have no oil and gas potential.