For all the Sino-Philippine tension at sea over disputed reefs and the megaphone diplomacy in recent days between Beijing and Hanoi over the Paracel Islands, it is the prospect of an intensifying dispute about international oil exploration in the South China Sea that alarms strategic analysts and diplomats.
The worst-case scenarios are not hard to conceive - rival exploration involving the assets of international firms and flanked by naval ships and paramilitary vessels, all carrying the risk of accident as well as the involvement of larger powers. 'We are talking about a powder keg...this could be the big one,' said one veteran military attache. 'Tensions over disputed oil exploration could easily degenerate into something far worse.'
The move, announced at the weekend, by the state-owned China National Offshore Oil Corporation to tender for exploration bids in blocks already being explored by international firms in deals with Vietnam is being seen as a reflection of deepening concern by Beijing about disputed waters that are close to some of the world's busiest shipping lanes.
For several years, Beijing has publicly and privately objected to exploration deals between Hanoi and some of the world's largest oil firms off its coast in waters bisected by China's controversial nine-dotted line. There have been public expressions of protest, formal diplomatic complaints and, as the South China Morning Post first reported back in 2008, discreet warnings by Chinese envoys to oil firms. The message from Beijing has been clear - the firms are encroaching on Chinese sovereignty and could harm their Chinese interests. Hanoi, obviously, disagrees.
Some firms, including the British giant BP, have pulled out. America's ExxonMobil - the world's biggest oil firm - is still there and Indian, Russian and Japanese giants have also moved in, lured by Hanoi as part of its broader policy of internationalising the South China Sea issue.
Beijing's threats to ExxonMobil played into mounting Washington concerns about reports of Chinese assertiveness in the South China Sea. The PetroVietnam conglomerate, meanwhile, is to open talks with more Japanese firms next month, according to diplomatic sources.