Is Joint Development an Option as Tensions Mount in South China Sea?

As China's land reclamation activities in the South China Sea aggravate tensions, joint resource development has been mooted to cool rising temperatures in the regional territorial spat.

Simmering tensions in the South China Sea flared up once more recently as protagonists in the territorial dispute clashed over China’s land reclamation works amid concerns that Beijing could use the artificial islands as military outposts to bolster its claims, including ownership of petroleum resources, in the contested region.

To soothe testy ties in the region, Taiwan – an island that Beijing claims sovereignty since the People’s Republic of China was established in 1949 after the civil war in China – proposed in May that parties in the South China Sea dispute should focus their efforts on joint resource development. Taiwan’s President Ma Ying-jeou argued that doing so would provide tangible benefits for the claimants, while setting aside the contentious issue of sovereignty.

But the response to Ma’s South China Sea Peace Initiative (SCSPI) appeared rather muted as none of the concerned parties has diplomatic ties with Taiwan, the Voice of America reported May 26. Even so, joint development is still an option for consideration should the claimants decide to break the current impasse and proceed to explore and develop the potentially rich petroleum resources in the region.

China Sees Energy as Key to the Regional Dispute

Hydrocarbons appear a key factor in the South China Sea dispute, according to a recent paper written by a Chinese researcher, who noted that China’s territory covered the area delineated by the “nine-dash line,” extending the country’s boundary near to the shores of Brunei, Malaysia, the Philippines and Vietnam.

“Since the 1960s, some countries in the South China Sea region … have increased their efforts to grab oil and gas from the South China Sea, attempting to declare sovereignty and demonstrate their claims,” Li Guoqiang, a senior research fellow at the Institute of Chinese Borderland History and Geography at the Chinese Academy of Social Sciences (CASS), said in a May 11 article posted by the China Institute of International Studies – the think tank of the Chinese Ministry of Foreign Affairs – on its website.

According to Li, China’s petroleum exploration, development and production efforts in the South China Sea had previously been constrained by three factors – funds, limited deepwater exploration technology and the regional security environment.

Access to capital is no longer an impediment given Beijing’s emergence as a global economic powerhouse, with the World Bank reporting that China’s gross domestic product has risen from $189.4 billion in 1980 to $9.24 trillion in 2014.

Meanwhile the technology barrier is gradually being overcome, including the deployment of China’s first locally built and owned deepwater rig – China National Offshore Oil Corp. Ltd.’s (CNOOC) $975 million Hai Yang Shi You 981 (UDW semisub) – for exploration drilling near the Paracel Islands in the contested waters offshore Vietnam in May 2014.

“China offshore industry … keeps on improving. They will make mistakes, but they will learn from it,” Jason Waldie, associate director at Douglas Westwood, an industry consultancy, told Rigzone.  

China’s plan to extract energy resources in the South China Sea was developed some time ago.