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

“In 2008, CNOOC already announced plans to invest $31.76 billion (CNY 200 billion) in the exploration and development of the deepsea oil and gas fields in the South China Sea. The fact that they pledged so much capital indicates that they believe that the South China Sea contains huge and commercially viable reserves of oil and gas. The Chinese media has also described the South China Sea as having the potential to become the world’s fourth largest deepwater drilling region, after the so-called ‘Golden Triangle’ of the Gulf of Mexico, Brazil and West Africa,” Dr. Christopher Len, Fellow at the Energy Studies Institute of the National University of Singapore told Rigzone. 

An example of improving deepwater capability was highlighted in June 2012, when the Jianlong manned submersible reached a depth of 22,966 feet (7,000 meters), giving Beijing access to over 99.8 percent of the ocean’s seabed. Its capacity to operate in deepwater was complemented when HYSY 981 semisub became operational in 2011.

The development of such capabilities “laid a solid technological foundation for the prospecting and exploitation of oil and gas in the South China Sea … and deepwater oil and gas output in the South China Sea will reach 25 million tons in 2015 and 50 million tons in 2020, thus realizing China’s goal of building a deepwater version of Daqing,” CASS’s Li said, making reference to the country’s largest oil field in northeast China.

Li added that “in line with the acceleration of national defense construction and naval build-up, China’s security environment could be notably improved … the introduction of Chinese maritime police forces is going to further enhance China’s maritime law enforcement capabilities, offering safer and more secure safeguards for oil and gas resource development.”

Who is Ready to Tap Oil, Gas Resources?

While the countries in the South China Sea spat continues to pursue their territorial claims, China appeared to be the only one to have developed the capability of tapping the hydrocarbon resources in the region, at least for now.

“Can Vietnam and the Philippines exploit the resources? They don’t have the assets to do that … The Chinese are backed by its offshore industry and they are building offshore oil and gas units to exploit the resources in the region,” Waldie explained.

Vietnam and the Philippines will need a lot of capital and resources to develop the potential hydrocarbon reserves in the South China Sea, possibly pipeline or other infrastructure to bring the supplies to the market, he added.

In the meantime, China tasted its first deepwater success in the South China Sea last September when CNOOC discovered gas in the Lingshui field, 93 miles south of Hainan Island, using HYSY 981 semisub. The same deepwater semisub, which was at the center of a diplomatic and near-military row between China and Vietnam in May 2014 when it drilled near the Paracel Islands, is currently operating in the South China Sea.

China's Maritime Safety Administration announced recently on its website that HYSY 981 would drill 75 nautical miles south of the resort city of Sanya in Hainan from June 25 to August 20 and the Vietnamese maritime authorities have responded by indicating that they are tracking the rig's placement, Vietnam’s state-controlled Tuoi Tre newspaper website said June 26, as reported by Reuters.

The Joint Development Option

Joint development was mooted as an option following the latest round of tensions, triggered by Chinese reclamation works in the South China Sea, where Brunei, China, Malaysia, the Philippines, Taiwan and Vietnam all have overlapping territorial claims in the region, estimated by Vietnam’s daily Thanh Nien News at 1.35 million square mile.

Such reclamation caused anxiety in Southeast Asia, with The Wall Street Journal, citing U.S. estimates, reported June 16 that China has expanded artificial reefs in the Spratly Islands to 2,000 acres of land, up from 500 acres last year. Beijing’s island-building program was also viewed with concerns as it includes “transforming semi-submerged reefs into forward bases with airfields fit for military use.” 

To cool tensions, the Taiwanese President suggested joint resource development as it offers a practical and viable solution for dealing with the South China Sea tensions.