Chinese drilling rig off Vietnam likely to strike gas, experts say
A Chinese oil rig, the deployment of which in waters claimed by Vietnam early this month triggered a rupture in ties, has a good chance of finding enough gas to put the area into production, Chinese industry experts said.
That would give China its first viable energy field in the disputed South China Sea, one that is likely to be a source of friction with Hanoi for years to come.
For now, China has said nothing about the potential of the area. The first round of drilling had been completed, the rig operator said on Tuesday, without giving any results.
The US$1 billion deepwater rig owned by state-run China National Offshore Oil Company Group, parent of listed flagship unit CNOOC, is scheduled to explore until mid-August.
“The place where the rig is drilling at the moment is likely to be a gas field. China conducted three-dimensional geological surveys before moving the rig there,” said Wu Shicun, president of the National Institute for South China Sea Studies, a government think-tank in Hainan province.
China National Petroleum Corporation (CNPC), the dominant oil and gas producer in China, owns the block being drilled but has given it no name, Chinese officials said.
Deployment of the rig on May 2 set off deadly anti-Chinese riots in Vietnam, and scores of Vietnamese and Chinese ships remain squared off around the platform. There have been several collisions.
The rig lies about 330 km east of Vietnam and 370 km from the southern coast of Hainan. It is just south of the Paracel island chain occupied by China and claimed by Vietnam.
Hanoi has said the Haiyang Shiyou 981 rig is in its exclusive economic zone. China says its rig was operating within its waters.
In a report last year, the US Energy Information Administration said geological evidence suggested the Paracel Islands themselves did not have significant potential in terms of conventional hydrocarbons.
But near the islands the chance of making a major gas discovery was high, because there had been several gas finds already in the area, said James Hubbard, head of Asia oil and gas research at investment bank Macquarie in Hong Kong.
Vietnam has two fields to the west of the rig, much closer to its coast, where US giant Exxon Mobil discovered oil and gas in 2011 and 2012.