February 13, 2013

Energy, Security and Cooperation in the South China Sea

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.

To show the reader just how quickly events in the region are developing, the piece I published yesterday is already somewhat outdated.

In my discussion of China’s advances in deepwater drilling technology, for example, I wrote about how the state-run China National Offshore Oil Company, Cnooc, was in the throes of trying to acquire the Canadian-based Nexen Inc., including its high-tech ultra-deepwater drilling technology and Gulf of Mexico assets. When the bulletin went to press, the U.S. government had not yet approved the acquisition of Nexen’s Gulf of Mexico assets, leaving Cnooc in limbo and the possibility that the Chinese company may not acquire Nexen’s U.S. assets.

But Quartz reported yesterday that the U.S. government approved the $15.1 billion acquisition, paving the way for Cnooc to make even greater strides in advancing its deepwater drilling technology and techniques. This could have consequences in the South China Sea.

In my bulletin, I wrote:

China sees its ability to develop deepwater resources on its own as essential to securing claims over those resources and buttressing its broader strategic position in the South China Sea. When CNOOC launched its first deepwater drilling platform in 2012, the company’s chairman, Wang Yilin, made clear that “Large-scale deep-water rigs are our mobile national territory and a strategic weapon.” As a result, China will continue to press ahead and develop the capability to explore and drill in the South China Sea’s deepwater energy resources, which will likely exacerbate regional tensions and increase the potential for escalation.

Watch for developments on this front. 

Photo: Courtesy of the Bureau of Safety and Environmental Enforcement.