It appears that the long-feared specter of energy disputes in the South China Sea may finally be materializing. China has launched its massive $1 billion HD-981 offshore drilling rig into waters that Vietnam (and the United Nations Convention on the Law of the Sea) determine to be Vietnam’s exclusive economic zone.
The move is more than a resource grab by China—it defies a public agreement from last October between the two countries to “play down maritime frictions,” and undermines generally friendly relations between the neighbors with a shared communist history. China described the rig as a “strategic weapon” when it was launched in 2012, a description that rang true when it and 80 other vessels in China’s fleet “intentionally rammed” two of Vietnam’s Sea Guard vessels 171 times over a period of four days. As of right now, 86 Chinese ships, including three military vessels, are accompanying the oil rig in Vietnam’s exclusive economic zone. In addition to “ramming” incidents, there have been battles between Vietnamese ships and China’s vessels via water cannon.
By now it’s clear that the vessels will be staying put in the disputed territory near the Parcel Islands, despite Vietnam’s strong opposition both on and offshore.
Hanoi has accused China of “brazenly” triggering a standoff, and warned other Southeast Asian nations of Beijing’s growing assertiveness in contested waters. But outside of diplomatic channels, Vietnamese workers in China are taking to the streets. Reuters reported this morning that “thousands of Vietnamese set fire to foreign factories and rampaged in industrial zones.” Gates were smashed and rioters set 15 factories on fire. Ian Storey, a South China Sea expert at the Institute of Southeast Asian Studies expressed fear that “a dark chapter in Sino-Vietnamese relations is now being written.” Storey added that the high tensions mean that the Vietnamese government is under increased pressure to respond, which could easily lead to a military clash with China that the country will not win.
Despite the quiet storm that China’s behavior has elicited, it maintains a calm front. Today’s Global Times—a Chinese daily newspaper—made the case that “While reiterating calls for peaceful settlement of the dispute and joint development of resources, China has also made it clear that it is confident and capable of countering challenges to its territorial and sovereign integrity,” while Beijing maintains that it has sole rights to the territory. Secretary of State John Kerry described China’s recent actions as “provocative,” while Chinese Foreign Ministry spokeswoman Hua Chunying stated, “There are countries taking provocation, but it is by no means China.”
Nonetheless, China’s recent moves in the area have rattled many of its neighbors, such as Singapore. In a March speech to parliament, Singapore foreign minister K. Shanmugan said the lesson of Ukraine is that “international guarantees count for nothing. You have to be able to defend yourself.” Steve Levine at Quartz likens this sentiment of other countries with claims in the South China Sea.
Obviously, given all the trouble that the China National Offshore Oil Corporation (CNOOC) has taken to place and maintain the rig, the territory near the Parcels must be known to hold ample oil and gas reserves, right? Yes and no. The following chart, based on EIA’s data, shows that the potential undiscovered resources in the Sea are just slightly over that of Europe, and only a fraction of what exists in the rest of Asia. However, the real truth is that nobody actually knows how much oil and gas is there. Greater exploration and research is required.
That exploration is almost undoubtedly what China is looking to do. And once those resources are discovered, it wants its presence and extraction rights in those waters to be firmly enough entrenched that Malaysia and Vietnam are without recourse.
That said, is the South China Sea the hottest new oil frontier? According to the Wall Street Journal, China has opened up a number of blocks to offshore oil companies for drilling leases, but major oil companies have expressed little interest given the territory disputes in play. Our bet? It’s safe to assume that whatever new production does emerge from this potentially prolific region will be beset by the typical above-ground challenges that accompany oil production in the world’s most challenging geological and political environments.
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