Will Beijing’s Aggressive South China Sea Push Ensnare A U.S. Oil Major (Part 1)
A Chinese survey vessel, the Haiyang Dizhi 8, on Saturday extended its activities to an area closer to Vietnam’s coastline, ship tracking data showed, after the U.S. and Australia expressed concern about China’s actions in the disputed South China Sea.
The Haiyang Dizhi 8 first entered Vietnam’s UN-mandated 200-nautical mile exclusive economic zone (EEZ) early last month where it began a weeks-long seismic survey, triggering a tense standoff between coastguard and naval ships from Vietnam and China.
The return of Chinese ships to the area has provoked harsh responses from both Hanoi and Washington. US Secretary of State Mike Pompeo earlier this month criticized China’s actions in the South China Sea as “coercion,” while Vietnam’s Ministry of Foreign Affairs lodged public, formal complaints to what it called China’s relevant institutions and also called for international support.
Vietnamese Foreign Ministry spokeswoman Le Thi Thu Hang said that China had “violated Vietnam’s exclusive economic zone and continental shelf.” The ministry ordered China to immediately “withdraw all Chinese survey and escorting vessels from the Vietnamese waters.”
China’s aggressive push in other nation’s territorial waters in the South China Sea, particularly Vietnam, is creating a negative backlash for Beijing, as Hanoi and others seek closer alliances with Washington, albeit the U.S. 7th fleet, as these concerned nations collectively push back against Chinese hegemony in the region.
Hanoi Folds under Chinese Pressure - Twice
Tensions between Beijing and Hanoi in the disputed area also come a year-and-a-half after Spanish energy firm Repsol suspended work on an US$200 million offshore natural gas project in Vietnamese waters after Repsol’s Vietnamese partners came under pressure, reportedly including military threat, from China.
Repsol also suspended drilling on an exploration project off Vietnam’s coast in 2017 after Vietnam also came under Chinese intense pressure over Beijing’s South China Sea territorial claims.
Russia, which is also working with Vietnam to explore for gas in its territorial waters, is also being dragged into the dispute. Last month, China dispatched a Coast Guard ship in a what was described as a “threatening manner” toward Vietnamese vessels servicing a Japanese-owned oil rig, the Hakuryu-5, leased by Russian state oil giant Rosneft in Vietnam’s Block 06.1, 230 miles (370 km) southeast of Vietnam.
What’s at Stake
China has over-lapping territorial claims in the South China Sea with the Philippines, Vietnam, Taiwan, Malaysia and Brunei and claims around 90% of the sea in what is commonly referred to as its “nine-dash line,” based mostly on questionable historical claims.
The South China Sea is rich in both marine resources and hydrocarbons, particularly natural gas. An older Chinese estimate places potential oil resources in the South China Sea as high as 213 billion barrels, though many Western analysts have repeatedly claimed that this estimate seems extremely high.
A conservative 1993/1994 US Geological Survey (USGS) report estimated the sum total of discovered reserves and undiscovered resources in the offshore basins of the South China Sea at 28 billion barrels – yet, this estimate, for its part, seems particularly low.
According to the USGS, about 60-70% of the area’s hydrocarbon resources are gas while the sum total of discovered reserves and undiscovered resources in the offshore basins of the South China Sea is estimated at 266 trillion cubic feet (tcf).
According to a newer USGS study in 2010, there is a 95% chance that there is at least 750 million barrels of oil in the South China Sea Platform, a median chance of around 2,000 million barrels, and a low probability (5%) of over 5,000 million barrels. Geologists have recently stated that the South China Sea Platform is an area rich with source carbon and has the perfect geological conditions necessary for hydrocarbon development.
American Oil Major Joins the Fray
As developments between Hanoi and Beijing unfold, American oil major Exxon Mobil is also working with joint partners PetroVietnam and PetroVietnam Exploration Production Corp. in the Ca Voi Xanh (Blue Whale) project, Vietnam’s largest gas venture, located in deep-water Block 118, about 55 miles (88 km) off the Vietnamese coast also in the South China Sea.
To be continued in part 2