Oil, Gas Development in South China Sea Remains on Ice

Oil, Gas Development in South China Sea Remains on Ice

Rigzone Looks Back: Decades-long territorial disputes between China and smaller Southeast Asian states in the South China Sea have frozen the exploration and development of potential petroleum resources. A unilateral attempt by China to proceed with the development of such resources is expected to be greeted with political and diplomatic challenges from rival claimants. This article pointed to joint development being an option to defuse tensions and tap the petroleum resources. The question is whether the claimants are prepared to reach a solution to the dispute.

Foreign Ministers of the 10-member Association of Southeast Asia Nations (ASEAN) states held their annual meeting with dialogue partners, including China and the United States, at the ASEAN Regional Forum in Bandar Seri Begawan, where the South China Sea territorial dispute – particularly between ASEAN-member the Philippines and China – were on the discussion agenda.

Recent Tensions

Tension over the territorial spat has escalated in recent years as China became more assertive – to the extent of warning rival claimants not to engage in any oil and gas exploration in the area – in its claims over the South China Sea. The more assertive approach from China – underpinned by stronger naval might – towards rival claims, especially over the Spratly Islands and Paracel Islands, manifested itself in several incidents in recent years.

In March 2011, two Chinese patrol vessels harassed CGG Veritas’ MV Veritas Voyager, a survey ship chartered by Forum Energy plc for seismic work at Reed Bank, located east of the disputed Spratly Islands. Separately, Vietnam National Oil and Gas Group (PetroVietnam) protested to Beijing after Chinese fishing vessels cut off the cable of the company’s Binh Minh 02 seismic survey vessel last November while it was operating on the Vietnamese continental shelf around the Gulf of Tonkin. Vietnam was further infuriated when China National Offshore Oil Corporation (CNOOC) offered exploration blocks in the South China Sea in a June 2012 tender that PetroVietnam had already licensed to Exxon Mobil Corp. and OAO Gazprom.

Vietnam and the Philippines also protested as China sought to entrench itself in the disputed territories in July 2012 when it established Sansha city as an administrative center in the Paracel to oversee “Chinese” territory in the area including the Paracel and Spratly Islands. Philippines deemed these incidents to be sufficiently provocative and raised the matter to a United Nations (UN) tribunal under the UN Convention on the Laws of the Sea to challenge the Chinese claims in the area.

China, on the other hand, was becoming more concerned about a greater U.S. presence in the South China Sea. The U.S. Navy was becoming more visible and an increased naval co-operation between the U.S. and the Philippines in the region was not welcomed by China. This was despite U.S. stating that it was only interested in helping the rivals to seek a peaceful resolution in the South China Sea dispute and not side with any of the protagonists.

Strategic Importance of South China Sea

The South China Sea, which stretches from Singapore and the Strait of Malacca in the southwest to the Strait of Taiwan in the northeast, is one of the world’s major trading routes. Its rich marine and potentially vast energy resources make control over the area particularly attractive for the claimant states from a strategic and economic viewpoint. China’s claim over the South China Sea has been challenged by four ASEAN members – namely Malaysia, Philippines, Vietnam and Brunei.

“The core issue (in the territorial dispute) is that China has taken the position that they have indisputable sovereignty over nearly the entire South China Sea,” Philippines Foreign Minister Albert del Rosario said at the Brunei meeting July 3 as reported by Reuters.


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