The South China Sea Oil on troubled waters Two case studies in a disputed sea

The South China Sea

Oil on troubled waters

Two case studies in a disputed sea

Last July Brightoil, a company listed in Hong Kong with high-level political connections on the mainland, bought the exploration rights to 6.2m acres (2.5m hectares) of seabed from an American company, Harvest Natural Resources. The block, which the Chinese call Wan’an Bei 21 (WAB-21, part of an area known in English as the Vanguard Bank), has a controversial history. Although it lies more than 650 nautical miles (about 1,200km) from the Chinese coast and just 200 nautical miles from Vietnam, China asserts “historic rights” over the area. It lies near the south-western edge of the U-shaped “nine-dash line” that marks Beijing’s ambiguous claim in the sea (see map).

China issued a licence to explore for oil in WAB-21 in 1992. That came as a shock, because it was the first time China had claimed resources in the South China Sea so far away from its own coast. When Chinese vessels attempted to survey the block in 1994, Vietnam sent its navy to stop them. Vietnam then dispatched an oil rig to drill there, and it was China’s turn to impose a blockade. Neither side was able to extract any oil.

In 1996 Benton Oil and Gas, the precursor of Harvest Natural Resources, bought the rights to WAB-21 for $15m. Harvest was never able to develop the block. Instead, Vietnam drew up its own exploration blocks over the same area and awarded them to Talisman of Canada and ExxonMobil of America. China regards the move as a violation of its own claim. Four years ago Beijing organised a flotilla of fishing vessels to block and ensnare a seismic-survey vessel working for Talisman in the area. Talisman continued regardless, and has recently been drilling in a southern part of WAB-21, in a block the Vietnamese call 136/03.

Yet since Brightoil picked up the rights to WAB-21 (for just $3m), the Chinese have muscled back in. In late October a Chinese craft, the Hai Yang 4, guarded by four escort vessels, spent two weeks conducting seismic surveys in the area. The Vietnamese authorities appear to have decided not to force a showdown, unlike earlier in the year when they sent dozens of vessels to challenge a Chinese oil rig drilling off the Paracel Islands further north. Indeed, as the Hai Yang 4 was surveying WAB-21, China was hosting the highest-level Vietnamese military delegation to visit Beijing in years. The visit was intended to repair the damage to bilateral relations caused by the oil-rig incident. Yet renewed surveying by China could strain relations again.

A different approach to finding oil in the South China Sea emerged late last year. In mid-November Fosun, a big, private Chinese conglomerate, bought a small Australian energy company called Roc. Perhaps unwittingly, it also bought into the South China Sea disputes. Among its many interests, Roc has a contract with Malaysia’s state oil behemoth, Petronas, to develop fields off the coast of Sarawak. Crucially, though these fields, known as the Balai Cluster, lie within Malaysia’s 200-nautical-mile exclusive economic zone, they are also inside China’s claimed nine-dash line, whose legitimacy Malaysia contests. Assuming Fosun holds on to these interests, a Chinese company is in effect recognising Malaysia’s claim in this area of the sea at the expense of the Chinese claim.

Both Brightoil and Fosun have powerful connections with China’s political elite. Fosun’s chairman, Guo Guangchang, is a member of the Chinese People’s Political Consultative Conference (CPPCC), an advisory body controlled by the Communist Party. Brightoil’s chairman, Sit Kwong-lam, also sits on the CPPCC and is vice-president of the state-dominated oil industry’s trade body. His company seems to be acting as an arm of Chinese policymaking in the South China Sea, whereas Fosun seems to be acting against it. But by working with the Malaysian authorities rather than against the Vietnamese, Fosun appears much more likely than Brightoil actually to deliver oil to Chinese consumers.

NYT

New Images Show China Literally Gaining Ground in South China Sea

Photo

A satellite image from March 16 shows dredgers working at the northernmost reclamation site of Mischief Reef, part of the Spratly Islands, in the South China Sea. Credit Center for Strategic and International Studies via Digital Globe

WASHINGTON — The clusters of Chinese vessels busily dredge white sand and pump it onto partly submerged coral, aptly named Mischief Reef, transforming it into an island.

Over a matter of weeks, satellite photographs show the island growing bigger, its few shacks on stilts replaced by buildings. What appears to be an amphibious warship, capable of holding 500 to 800 troops, patrols the reef’s southern opening..

China has long asserted ownership of the archipelago in the South China Sea known as the Spratly Islands, also claimed by at least three other countries, including the Philippines, an American ally. But the series of detailed photographs taken of Mischief Reef shows the remarkable speed, scale and ambition of China’s effort to literally gain ground in the dispute.

They show that since January, China has been dredging enormous amounts of sand from around the reef and using it to build up land mass — what military analysts in the Pentagon are calling “facts on the water” — hundreds of miles from the Chinese mainland.

The Chinese have clearly concluded that it is unlikely anyone will challenge them in an area believed rich in oil and gas and perhaps more important, strategically vital. Last week Adm. Harry Harris, the commander of the United States Pacific fleet, accused China of undertaking an enormous and unprecedented artificial land creation operation.

“China is creating a great wall of sand with dredges and bulldozers,” Admiral Harris said in a speech in Canberra, Australia.

Defense Secretary Ashton B. Carter, on his first trip to Asia, put the American concerns in more diplomatic language. In an interview to coincide with his visit, published Wednesday in the Yomiuri Shimbun, one of Japan’s largest dailies, Mr. Carter said China’s actions “seriously increase tensions and reduce prospects for diplomatic solutions” in territory claimed by the Philippines and Vietnam, and indirectly by Taiwan.

He urged Beijing to “limit its activities and exercise restraint to improve regional trust.” That is essentially the same diplomatic message the Obama administration has been giving to China since Hillary Rodham Clinton, then the secretary of state, and her Chinese counterpart faced off over the issue at an Asian summit meeting in 2010.

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