Energy needs fuel tensions in East and South China seas

Jul 09, 2004 02:00 AM

by Michael Richardson

China's assertion of sovereignty over Taiwan is a bedrock policy issue for Beijing. But its conflicting maritime frontier claims with other Asian countries are also a source of potential conflict.
The motivation for pursuing these claims in the East and South China seas is being increasingly dictated by the region's energy needs. For example, China has allowed its top oil producer, PetroChina, to explore for oil and gas in the southern part of the South China Sea in an area industry sources say is near the disputed Spratly Islands. PetroChina did not say when the search would start but added that preparatory work had begun.

Just over a decade ago, China was still a net exporter of oil. Today, it is the fastest-growing user of oil in the world, ahead of energy-efficient Japan and second only to the United States in terms of total consumption and imports.
China's oil use is expected to rise by almost a third to 300 mm tons by 2010. By then, imports will amount to 50 % of China's total oil supply, up from around one-third now. China will not only become more dependent on imported oil and gas for its future economic growth, modernisation and prosperity; its reliance on supplies from the volatile Persian Gulf, and from politically unstable West Africa, also seems set to increase.

Nearly 60 % of Chinese oil imports currently come from the Middle East. Another 10 % come from West Africa, which is seen not just by the US, but by China, India and Japan as well, as a major source of oil for the future.
Japan and South Korea -- both almost entirely dependent on imported energy for their current and future growth -- are even more reliant on overseas sources of oil and gas than China. Japan draws around 85 % of its oil from the Middle East and South Korea nearly 80 %.

More of North-east Asia's gas imports, too, are likely to come from major Persian Gulf exporters. That is why China and Japan are racing to secure other sources of supply closer to home, including CentralAsia, Siberia and the East China Sea.
In the latter, Tokyo is contesting Beijing's right to develop a gas field near the edge of Japan's exclusive economic zone and launched its own seismic survey in the area despite a stern warning from China recently not to risk any action that could upset bilateral relations and regional stability. The field is estimated to contain up to 200 bn cf of gas reserves. Japanese officials have indicated the area may also yield sizeable oil reserves.

A longstanding dispute between China and Japan over ownership of the Senkaku Islands in the East China Sea also flared again in the past few months. The islands are uninhabited but under Japanese control. They are constantly patrolled by Japan Coast Guard vessels. Geological and seismic surveys around the Senkakus have indicated that the continental shelf contains sizeable oil and natural gas reserves.
Meanwhile, in the South China Sea, China, Taiwan and Vietnam claim the whole of the widely scattered Spratly archipelago which includes at least 200 small islands, rocks and reefs. Many are partially submerged and unsuitable for habitation. The total land area of the Spratly Islands has been calculated at around 7 sq km. But as with the Senkakus, its specks of territory are important because sovereignty claims to them can be used to bolster claims to ownership over huge swathes of the seabed and continental shelf that surround them.

So whoever is in undisputed or effective control of the seemingly insignificant specks of land may be able to exploit any oil and gas there. Earlier this year, offers of bird-watching, holiday cruises and flying tours rekindled tensions over disputed atolls and reefs in the South China Sea. In March, Taiwan built a bird-watching hide on one of the specks of territory it claims in the Spratly Islands.
In April, Vietnam launched what it said was the first of a series of holiday cruises to cays it occupies in the Spratly chain. Vietnam also began work to bring a disused airstrip on one of the cays back into working order. Vietnam protested against Taiwan's activity while China objected to Vietnam's moves, taking the opportunity to reiterate its assertion of “indisputable” sovereignty over the Spratlys.

China held military exercises in the South China Sea in April, sending a signal to rivals to back off. Malaysia, the Philippines and Brunei -- the other claimants to parts of the widely scattered Spratlys -- were alarmed at the flurry of assertiveness by Taiwan, Vietnam and China, not least because it was in blatant defiance of the spirit of a non-binding joint declaration signed in November 2002 by China and the 10 members of ASEAN.
The declaration on conduct of the parties said that disputes should be resolved peacefully and called on claimants to avoid actions that might cause tension.

Why is there a resurgence of tensions now in the East and South China seas, after all the diplomatic efforts to damp them down?
A significant part of the answer is the increasing imperative of major East Asian economies, led by China and Japan, to secure disputed maritime frontiers and gain control over natural resources, especially offshore oil and gas, that are seen as vital for future growth.
The South China Sea has proven oil reserves estimated at 7 bn barrels while oil production in the region is currently around 2.5 mm bpd. Gas reserves and output are larger still.

The petroleum-producing states include Malaysia (which accounts for almost half the region's total offshore oil output), China, Vietnam, Brunei, Indonesia and the Philippines.
Maps published by China mark its maritime boundary as a broken line extending deep into the South China Sea. The Chinese claim the line encompasses not just the Paracel and Spratly islands but also many of the offshore oil and gas fields being exploited or explored by South-east Asian countries within 352 km of their territory. Resource estimates for the region, that have been reported in the Chinese media or attributed to Chinese officials, vary greatly, from around 100 bn barrels of oil to more than double this amount.

A common rule-of-thumb for such frontier zones as the seabed surrounding the Spratlys is that perhaps 10 % of the potential resources can be economically recovered. Using this rule, Chinese estimates imply potential production levels for the Spratly zone of between around 1.5 mm bpd to as much as 3 mm bpd.
China, the world's sixth largest economy, is expected to consume about 5.7 mm bpd of oil this year, up from 5.3 mm bpd last year.

Availability of crude oil from the South China Sea, at the upper end of Chinese estimates, could cover China's current oil import requirements. However, natural gas may turn out to be the most abundant source of energy in the South China Sea. Most of the fields explored have yielded gas rather than oil. Estimates from the US Geological Survey indicate that 65 % of the region's hydrocarbon resources are gas. As with oil, China's optimistic view of the South China Sea's gas potential is not sharedby most non-Chinese analysts.
Still, the point is that China evidently sees both the East and South China seas as potentially rich petroleum provinces that are all the more important because they are close to home and could ease dependence on increasing energy imports from more distant sources, especially the Persian Gulf.

The writer is a visiting senior research fellow at the Institute of South-east Asian Studies in Singapore. This is a personal comment.

Specks but...
The total land area of the Spratly Islands has been calculated at around 7 sq km. But as with the Senkakus, its specks of territory are important because sovereignty claims to them can be used to bolster claims to ownership over huge swathes of the seabed and continental shelf that surround them.
So whoever is in undisputed or effective control of the seemingly insignificant specks of land may be able to exploit any oil and gas there.

Source: Straits Times
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