April 16, 2012
Great game in the South China Sea
By The Hanoist
On April 5, Russian energy giant Gazprom plunged into the maritime dispute between Vietnam and China with the announcement it would help state-owned PetroVietnam develop a lucrative off-shore energy field. By taking a major stake in the 5.2 and 5.3 blocks located in the Nam Con Son basin, Gazprom brings both exploration know-how and Russian political clout to the deal.
The entire Nam Con Son Basin lies within Vietnam’s 200-mile exclusive economic zone (EEZ) under international law. The eastern portion of the shallow water basin where the two blocks are situated, however, is on the Chinese side of the U-shaped, nine-dash map Beijing uses as the basis for its claim over most of the South China Sea. 
Just five days after the Gazprom announcement, China’s Foreign Ministry stated its opposition to “the exploration and exploitation of ocean oil and gas resources in Chinese sea territories without our permission” and said it had “made representations and taken measures to stop these illegal activities.”
Similar pressure from China caused United Kingdom-based BP to delay production and eventually withdraw from blocks 5.2 and 5.3 in 2009, forcing Vietnam to find a new international drilling partner. In a batch of US Embassy in Hanoi cables released by the transparency group WikiLeaks, American diplomats revealed that BP and other Western companies with business interests in China were under significant pressure to withdraw from Vietnam.
The leaked cables speculated that Vietnam could turn to a non-Western energy company less susceptible to Chinese commercial pressure. Gazprom, which is Russia’s largest company and enjoys strong government backing, will likely be more immune to Beijing’s pressure.
In recent years, Moscow has presented itself as a reliable friend to Hanoi, one that will not endanger its national security like China or apply pressure for improvement in human rights like the United States and European Union. In return, Russia has won lucrative contracts to modernize the Vietnamese military and build the first two nuclear reactors in the country.
Another regional power in this evolving great game is India. Despite vocal protests from Beijing, Indian-state owned ONGC (Oil and Natural Gas Corp Ltd) entered into a long-term energy cooperation deal with PetroVietnam in November 2011. ONGC reiterated recently that it is moving aggressively ahead with exploration at blocks 127 and 128, which are inside Vietnam’s EEZ but also straddle China’s nine-dash claim.
Of the private Western firms with contracts in Vietnam, the most prominent is Exxon Mobil. At the end of last year, the US energy giant reported a “potentially significant” offshore oil and gas discovery at block 119 near Danang but also overlapping into waters claimed by China.
Other than a press release announcing the find, Exxon Mobil has taken a relatively low-key approach – a reflection, perhaps, of China’s previous warnings to the US company to stop exploring in the area.
For Vietnam, the participation of foreign energy firms in offshore exploration is critical. With its overall energy production beginning to decline, Vietnam needs to drill further from the coast to find productive fields and generate export earnings to fund government coffers.
The presence of Gazprom, ONGC and Exxon Mobil – symbolizing the commercial might of Russia, India and the US respectively – is also important for reinforcing Vietnam’s control over its entire 200-mile EEZ.
High power stakes
Just how much oil and gas lie beneath the contested maritime area? According to a much publicized Chinese study, the South China Sea could hold as much as 213 billion barrels of oil, or the equivalent of 80% of Saudi Arabia’s known reserves. In a separate BP estimate, the entire region may also contain 2 quadrillion cubic feet of natural gas, more than five times the known natural gas reserves of North America.
Given its massive resource needs, China seems motivated to seize this entire energy bounty for itself. From Beijing’s perspective, it is being robbed of around 1.4 million barrels of oil per day from illicit production by Vietnam, Indonesia, Malaysia and the Philippines.
According to energy experts, the geology of the South China Sea has blessed the western and southern rims of the sea with the most productive and easy to extract offshore oil and gas fields. Unfortunately for Beijing, these are the waters furthest from China and within the continental shelf of the other claimants.
One way to possibly lower the heat in the South China Sea would be through joint exploration. However, that would require all of the claimants to clarify their demands and narrow down what areas are truly under dispute.
To untie the knot of competing claims over islands and ocean, researcher Duong Danh Huy has proposed separating the disagreements over the Paracel and Spratly archipelago – claimed in whole or part by China, Taiwan, Vietnam, Philippines, Malaysia and Brunei – with the disputes over the waters of the South China Sea.
As tiny uninhabited islands and rocks, each of the features within the Paracels and Spratlys would be entitled to 12 nautical miles of surrounding water. Control of each of these several hundred 12-mile radii zones would be negotiated separately from that of the remaining expanse of the South China Sea, according to Duong’s proposal. All the negotiations would be guided by international maritime law.
So far, however, China has shown a preference for bilateral engagement with individual claimants over a multilateral solution. To enforce its maritime claims, Beijing has stepped up actions seen as intimidation and harassment by outside observers.
Chinese patrol vessels twice last year sabotaged PetroVietnam exploration ships operating within Vietnam’s EEZ. In March, China seized 21 Vietnamese fishermen in disputed waters and continues to detain them pending payment of a large fine. Last week, China precipitated a confrontation with the Philippines near the disputed Scarborough Shoal in the Spratly archipelago.
There could be more confrontation ahead. Following news of the Gazprom deal, China’s Foreign Ministry declared: “We hope relevant countries will work with us, to avoid pulling extra-regional countries into the disputes. We also hope those extra-regional countries will respect and support dialogue and negotiation between China and relevant countries, and try to avoid getting involved.”
As Beijing ratchets up pressure on the smaller claimants, many of them are banding closer together, as evidenced by the recent announcement of joint Vietnam-Philippine military exercises.
Southeast Asian nations are also showing eagerness to counterbalance China by inviting in powers from beyond the region. Singapore just announced that it would host four American littoral combat ships. Despite its intentions, Beijing’s actions have unleashed a great game in the maritime commons for energy and security.
1. Map of Vietnam’s offshore energy fields in relation to Vietnam’s EEZ and China’s U-shaped claim, see here:
The Hanoist writes on Vietnam’s politics and people.
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