Center for a New American Security

Yesterday, CNAS published a new Flashpoints Bulletin that examines the influence global energy trends have in shaping oil and gas development in the South China Sea, and, consequently, the dynamic between countries in and around the region: Finding Common Ground: Energy, Security and Cooperation in the South China Sea (PDF).

In the piece, I highlight two important trends that are worth following that could add an additional layer of complexity to the South China Sea imbroglio: energy development as an element of India’s eastward engagement (i.e., Look East Policy); and China’s advances in deepwater drilling technology.

India’s interest in the South China Sea is getting more attention. Last year, The Times of India reported that India’s offshore Oil and Natural Gas Corporation (ONGC) Videsh would work with Vietnam to jointly explore for oil and natural gas resources in the South China Sea. Despite warnings from China – which has made sovereign claims to the entire South China Sea and its energy resources – India and Vietnam have pressed ahead with joint development, leading to increased tensions between China, India and Vietnam.

Last Friday, Vietnam lodged a complaint with China when two Chinese fishing boats reportedly blocked a Vietnamese seismic survey vessel that caused the ship’s cables to snap. The latest episode is just another in a string of incidents where Chinese fishing boats have blocked attempts by Vietnam and other countries to survey for natural gas and oil deposits. (Track these incidents using the CNAS Flashpoint timeline feature here.) The latest incident also comes on the heels of an announcement from China’s Hainan Province last week warning that provincial police would be permitted to board and search vessels violating China’s territorial waters, including in contested areas.

In response to the most recent attempt by Chinese fishermen to block Vietnam’s seismic surveying, Vietnamese officials said that the government would step up defensive patrols, including deploying marine police, to protect against future Chinese encroachment. India seemed to respond in kind, according to a New York Times report, saying “it would consider sending navy vessels to protect its interests in the South China Sea.”

Territorial claims over the South China Sea took an interesting turn last week.  

According to a report from Reuters, China’s new passports have raised the eyebrows of several South China Sea claimants: the country’s microchip-equipped passports contain a map of China’s claim over the South China Sea – represented by the country’s disputed nine-dash line.

The Philippines and Vietnam have condemned the Chinese passports, worrying that accepting the documents could legitimize China’s diplomatic claim over the sea. According to Reuters, “The map means countries disputing the Chinese claims will have to stamp microchip-equipped passports of countless visitors, in effect acquiescing to the Chinese point of view.”                              

"The Philippines strongly protests the inclusion of the nine-dash lines in the e-passport as such image covers an area that is clearly part of the Philippines' territory and maritime domain," Philippine Foreign Secretary Albert del Rosario said last week, according to Reuters.

China’s Foreign Ministry responded to questions about the passports, stating, "The passports' maps with their outlines of China are not targeting a specific country. China is willing to actively communicate with the relevant countries and promote the healthy development of Sino-foreign personnel exchanges.”

With the continuing dispute between China and Japan in the East China Sea, don’t forget to tune into CNAS’s Flashpoints page, an online web portal for those studying security in the East and South China Seas. Flashpoints not only has the latest developments from the region, but offers insights into the rich history surrounding the ongoing territorial disputes in the Asia Pacific.

Photo: Courtesy of CNAS.org. 

This post originally appeared on the Choke Points blog at ConsumerEnergyReport.com on September 11, 2012.

During her visit to the Asia Pacific last week, Secretary of State Hillary Rodham Clinton spoke to the dispute over the South China Sea, arguably one of the region’s most intractable challenges that, left unmanaged, could uproot stability in East Asia. Those countries at the heart of the dispute — particularly China, Vietnam and the Philippines — need to “establish rules of the road and clear procedures for peacefully addressing disagreements,” Secretary Clinton urged.

High Stakes at Sea

The dispute is complex. States ringing the sea are becoming increasingly assertive in their claims, driven by concerns of nationalism, sovereignty, and even the need to stake claims to the region’s lucrative (but dwindling) fish stocks.  And then there are the potential petroleum resources. Estimates of the region’s energy potential ranges widely, according to the independent U.S. Energy Information Agency: U.S. estimates suggest the region could contain roughly 28 billion barrels of oil; while Chinese estimates are much more optimistic, projecting more than 200 billion barrels of oil beneath the sea.

Despite much uncertainty about the size of the region’s oil and natural gas resources, countries in the region are increasingly behaving as though access to those potential petroleum reserves is zero-sum — a winner take all and leave none for the loser approach — that is pitting countries against each other to tap into those resources first. Indeed, China, Vietnam and the Philippines are actively soliciting bids from petroleum companies to explore for oil and gas in contested waters, escalating tensions and reinforcing this zero-sum perspective. This continued competition is destabilizing and countries in the region need to take efforts to tilt the balance of behavior toward cooperation so that countries across the region can benefit from the sea’s potential resource wealth.

Secretary of State Hillary Rodham Clinton met with officials of the Association of South East Asia Nations, or ASEAN, while traveling in Jakarta this week. During her visit at the ASEAN Secretariat, Secretary Clinton spoke to the regional dispute over the South China Sea and emphasized that all claimants “make meaningful progress toward finalizing a comprehensive code of conduct in order to establish rules of the road and clear procedures for peacefully addressing disagreements."

Photo: Courtesy of the U.S. State Department.  

All eyes are on Secretary of State Hillary Rodham Clinton and her visit to the Asia Pacific this week.

On Tuesday, Secretary Clinton met with officials of the Association of South East Asian Nations, or ASEAN, in Jakarta where she encouraged ASEAN leaders to work cooperatively with China to resolve the longstanding territorial dispute in the South China Sea. “The United States does not take a position on competing territorial claims ... but we believe the nations of the region should work collaboratively to resolve disputes without coercion, without intimidation and certainly without the use of force," Secretary Clinton said, according to a report on CBSNews.com. "That is why we encourage ASEAN and China to make meaningful progress toward finalizing a comprehensive code of conduct in order to establish rules of the road and clear procedures for peacefully addressing disagreements."

While the potential reserves of oil and natural gas are important drivers of Beijing’s assertive behavior in the South China Sea, access to the sea's energy resources is not the only issue behind China’s outsized claim to the area. According to a Sunday report in The New York Times, China's upcoming leadership transition may also be shaping Beijing’s behavior in the region.

“The leadership in Beijing appears to have fastened on to the South China Sea as a way of showing its domestic audience that China is now a regional power, able to get its way in an area it has long considered rightfully its own,” The New York Times reported. “Some analysts view the stepped-up actions as a diversion from the coming once-a-decade leadership transition, letting the government show strength at a potentially vulnerable moment.”

Of course, Beijing’s concerns about domestic politics and access to energy resources are not mutually exclusive. After all, China’s interest in the potential oil and natural gas in the South China Sea is in part driven by concerns over its vulnerability elsewhere, particularly the Strait of Malacca, through which up to 80 percent of China’s Persian Gulf and African oil imports travels. A closure of the strait could have an immediate impact on the Chinese economy and domestic stability.  “[I]f the Malacca Strait were closed for just one day, the disruption in energy supplies might cause social unrest in China, according to a well-placed officer of the People’s Liberation Army,” wrote Patrick M. Cronin and Robert D. Kaplan in a January 2012 CNAS study, Cooperation from Strength: The United States, China and the South China Sea.

The state-run China National Offshore Oil Corporation (CNOOC) is becoming an increasingly important element in Beijing’s South China Sea energy strategy.

According to The Times of India, CNOOC recently made a $15 billion bid to acquire Canada’s Nexen Inc., a company with deep expertise in offshore drilling that Beijing would like to tap into in order to exploit potential oil and natural gas resources in the South China Sea.

Beijing’s drive to develop advanced offshore drilling capability is seen in many ways as a cornerstone of its strategy to exploit the potential energy reserves beneath the South China Sea. According to some Chinese media reports, an estimated 70 percent of oil and natural gas reserves lie in deep-water reserves, at depths of over 300 meters. To date, however, China’s energy companies have lacked the technical capability to exploit these reserves, often drilling in shallower waters. In particular, CNOOC’s expertise in advanced offshore drilling has fallen behind other privately-held international oil companies that can drill to depths beyond 10,000 meters.

But that could all be changing. In May, CNOOC began operating China’s first-ever deep-water drilling rig that some observers say could prepare China to begin drilling to depths of between 10,000 and 12,000 meters, possibly eclipsing the record set in 2009 by the Deepwater Horizon rig that drilled to 10,683 meters. And CNOOC’s bid for Nexen Inc. may help the state-run company acquire additional technological expertise that it needs to successfully exploit the South China Sea’s deep sea resources.

Note: This post originally appeared on the Choke Points blog at ConsumerEnergyReport.com on July 2, 2012.

Beijing is flexing some more muscle to protect its energy interests in the South China Sea.

Last week, China began combat-ready patrols in the waters around the potentially resource rich Spratly Islands that both China and Vietnam have disputed claims to. And on Friday, China Daily reported that Beijing may develop a military presence in Sansha – a newly incorporated city located on one of the disputed Paracel Islands that was stood up to administer Chinese authority over the country’s South China Sea territories. (The city was established in response to a recent Vietnamese law that claimed sovereignty over the Paracel and Spratly Islands.)

The deployment of combat-ready patrols and discussions of developing forces at Sansha comes on the heels of an announcement from the China National Offshore Oil Company (CNOOC) that it will accept bits from foreign energy companies to explore and develop nine new blocs of the South China Sea that fall within Vietnam’s 200-nautcial mile Exclusive Economic Zone. (See the map here.) It is unlikely, though, that foreign energy companies will cooperate with CNOOC in these disputed blocs given the amount of risk the companies would have to assume in operating there. Regardless, Beijing is putting itself in a better position to protect its energy interests: “the announcement of these blocks reflects another step in China’s effort to strengthen its jurisdiction over these waters,” according to MIT Professor M. Taylor Fravel.

Making a Play for Resources

This recent activity joins a string of other incidents by China to protect its claims to the region’s potential hydrocarbon resources. Estimates of oil and natural gas in the South China Sea vary widely, from U.S. estimates of 28 billion barrels of oil to Chinese estimates of 213 billion barrels of oil. Yet no country knows what really lies beneath the seabed. Officials in Beijing appear to be placing bets that the South China Sea could turn out to be a “second Persian Gulf,” driving up strategic competition over potentially energy rich territory. But for years, efforts to conduct surveys to produce better measurements of the region’s resources have been impeded by Chinese vessels obstructing survey ships and others conducting seismic measurements.

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