UNTAPPED

The South China Sea’s untapped oil and natural gas are back in focus

Obsession
Energy Shocks
Obsession
Energy Shocks

The contested South China Sea has large deposits of oil and natural gas. Perhaps luckily for the environment, drilling for these resources has been discouraged by political tension among nations in the region. In particular, energy companies worry about China’s ongoing insistence that everything within its infamous nine-dash line—which marks off nearly the entire sea—is its own territory, despite an international tribunal invalidating the sweeping claim last year.

The uncertainty has made it hard for energy companies to justify the hefty investments needed to extract carbon resources from below the sea floor. Recently, though the carbon resources have started to make headlines again, with Vietnam, Indonesia, and the Philippines—and, of course, China—all involved. It’s a reminder that however quiet the issue gets at times, untapped energy riches are a key element to the South China Sea contest.

Map of China's nine-dash line showing the Spratly and Paracel islands and Scarborough Shoal
A contested sea.

Reed Bank

Reed Bank (also called the Reed Tablemount) is one of the major prizes in the South China Sea. Located near the Philippines coast, it is believed to hold large reserves of oil and natural gas. The nation’s main source of natural gas, the Malampaya field, will run out in less than a decade.

Reed Bank.
Reed Bank. (Notthebestusername/Wikimedia Commons, CC-BY-3.0)

Reed Bank clearly falls within the exclusive economic zone of the Philippines. As set forth by the UN Convention on the Law of the Sea, an EEZ extends 200 nautical miles (370 km or 230 miles) from the shore. (Reed Bank is 85 nautical miles off the coast.) While the zone can be treated as the high seas in most regards, all the resources within it belong to the coastal nation. The Philippines should be free to partner with any energy company it desires to extract those resources, and then use them as it sees fit.

According to the nine-dash line, Reed Bank belongs to China. When the Philippines has tried to explore there, China has stopped it. In 2011, Chinese patrol vessels nearly rammed a survey ship operating with permission from the Philippines. And in 2014, Manila criticized China for conducting regular “sovereignty patrols” in the area.

Now, Reed Bank is back in focus. On July 12, a Philippine energy official said drilling at Reed Bank could resume before year’s end, with Manila getting ready to offer new blocks to investors via bidding in December. Ismael Ocampo, an energy official, said he was hopeful that China would not complain or harass the crews of survey ships this time around.

That’s not a given. In May, Philippine president Rodrigo Duterte said his Chinese counterpart Xi Jinping had warned him there would be war if Manila tried to enforce last year’s tribunal ruling and drill for oil in disputed areas. Today (July 25), Duterte said that the Philippines and China will enter into joint oil exploration with China in those same parts, without saying when. That would conflict with Philippine law, however, as joint development within the country’s EEZ is prohibited by the constitution. It remains to be seen how that conundrum plays out.

Vietnam

Vietnam recently stopped a gas drilling operation located about 400 km (250 miles) off its southeast coast after receiving threats from China, according to a BBC report this week. While Vietnam had leased the area to one company, China had leased it to another. China threatened to attack Vietnamese bases in the Spratly islands unless the drilling stopped, according to the report.

An aerial view of Southwest Cay islet, part of the Spratly islands, being claimed by Vietnam in the disputed South China Sea, 21 April 2017. According to news reports, President Rodrigo Duterte has ordered the Armed Forces of the Philippines (AFP) to occupy all islands of the Philippines in the South China Sea to strengthen the country's claims. Aside from Philippines and China, other countries have overlapping claims in parts of the South China Sea including Brunei, Malaysia, Vietnam and Taiwan.
Southwest Cay islet, a part of the Spratly archipelago claimed by Vietnam. (EPA/Francis R. Malasig)

“China urges the relevant party to stop its unilateral actions that infringe upon China’s rights and safeguard with concrete actions the sound situation in the South China Sea that does not come easily,” Chinese foreign ministry spokesman Lu Kang said today at a regular briefing.

It wasn’t the first tussle between the two countries over energy resources in the sea, though it was the first in a while. In 2012, Vietnam protested the China National Offshore Oil Corporation inviting foreign companies to bid for oil exploration blocks falling well within Vietnam’s EEZ. And in 2014 China moved a massive mobile oil rig into another bit of contested water, sparking deadly anti-Chinese riots in Vietnam. (China eventually removed the rig.)

The North Natuna Sea

On July 14, Indonesia announced a new name—the North Natuna Sea—for the northern reaches of its exclusive economic zone in the South China Sea. Again, the nine-dash line overlapping with an EEZ was a big reason why. Within the overlapping area is the East Natuna Gas Field, one of the larger such fields in the world.

In this June 23, 2016 file photo released by the Indonesian Presidential Office, Indonesian President Joko Widodo, third right, accompanied by, from left to right, Cabinet Secretary Pramono Anung, Navy Chief of Staff, Adm. Ade Supandi, top Security Minister Luhut Panjaitan, Armed Forces Chief Gen. Gatot Nurmantyo and Riau Islands Gov. Nurdin Basirun stands on the deck of navy warship KRI Imam Bonjol, on the waters of Natuna Islands, Indonesia. Indonesia doesn’t have a territorial dispute with China, but Beijing’s nine-dash line, which signifies its claims, overlaps with Indonesia’s internationally recognized exclusive economic zone extending from the Natuna islands.
A visit to the Natunas by Indonesian president Joko Widodo, third right. (AP Photo/Agus Suparto, Indonesian Presidential Office)

Indonesia isn’t the first nation to counter China’s nine-dash line with a name change: In 2012 the Philippines renamed the part of the South China Sea off its western side the West Philippine Sea.

In response to Indonesia’s name change, Chinese foreign ministry spokesman Geng Shuang said that “South China Sea” has widespread international recognition. He added, “Certain countries’ so-called renaming is totally meaningless. We hope the relevant country can meet China halfway and properly maintain the present good situation in the South China Sea region, which has not come easily.”

Indonesia has also apprehended or chased off Chinese fishing vessels in the area in recent years, as another way of asserting its sovereignty.

There’s ongoing debate as to how much oil and gas the South China Sea actually holds, with some contending the potential riches are overblown and others arguing they’re underestimated. With surveying made difficult by politics, it’s hard to determine either way.

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