South China Sea: risk of China flashpoints ‘high’ as rival energy projects expand, report says

Every claimant except the Philippines is moving forward with oil and gas projects in the disputed waters, according to US report
Many new projects in the resource-rich region lie at the sites of previous confrontations

South China Sea

Laura Zhou

Published: 9:13pm, 9 Mar 2023

Why you can trust SCMP

A growing number of energy exploration projects in the disputed waters of the South China Sea will increase the chances of confrontations, particularly with Chinese patrols, according to a new report by a US think tank.

Many rival claimants in the resource-rich region have stepped up oil and gas development. China, Vietnam, Malaysia and Indonesia have all either announced or started new offshore projects.

AI just predicted the price tag for Beijing’s South China Sea ambitions

The South China Sea basin is estimated to hold 11 billion barrels of untapped oil and 190 trillion cubic feet (5.4 trillion cubic metres) of natural gas. But territorial disputes among China, Vietnam, the Philippines, Taiwan, Malaysia and Brunei, as well as energy exploration in the disputed waters, have sparked regular stand-offs between law enforcement vessels, further flaring tensions among rival claimants.

In a worrying sign, many of the new projects lie in the disputed waters, some at the sites of previous confrontations, according to a report by the Asia Maritime Transparency Initiative (AMTI), which is operated by the Centre for Strategic & International Studies.

01:37

PLA scrambles fighter jets after detecting foreign warplanes over South China Sea

“With the China coastguard increasing the frequency of patrols across disputed waters, the prospect of confrontation between Chinese law enforcement and oil and gas operators at many of these locations is high,” the report’s authors said.

Energy development has long been one of the most sensitive issues in the South China Sea disputes. Hostilities escalated after the Philippines accused China of sending warships and coastguard vessels across the contested waters in the South China Sea earlier this year.

However the Philippines, which suspended all oil and gas projects in the area in 2014 due to the territorial disputes, has not carried out any new projects since.

Among the contentious new developments are drilling operations by state-owned China National Offshore Oil Corporation (CNOOC) at the Lingshui 25-1 gas field, which sits in areas of the continental shelf claimed by both China and Vietnam.

In September last year, Malaysia announced at least three discoveries in its exploration blocks off Sarawak, an active area for Malaysian oil and gas development and Chinese coastguard patrols.

Production is expected to start this year at the Kasawari gas field, which is estimated to hold 3.2 trillion cubic feet of natural gas. The field became a flashpoint between China and Malaysia in 2021 when Beijing sent coastguard vessels near the waters “on daily basis”, drawing protest from Malaysia, which summoned the Chinese ambassador twice in June and October.

In January, Indonesia announced a USD$3 billion plan to develop the Tuna gas field located within its exclusive economic zone and inside Beijing’s “nine-dash line”, which it uses to claim historical rights over 80 per cent of the South China Sea.

Under the plan, gas from the Tuna field would be piped to Vietnam’s Nam Con Son project at Vanguard Bank, in the southern portion of the South China Sea. Chinese and Vietnamese law enforcement vessels were locked in a stand-off in the area in 2014 over a Chinese oil rig platform. That was followed by a confrontation in 2019 after Beijing deployed a geological survey ship to the region.

Vietnam, the most vocal critic of Beijing’s extensive claims in the South China Sea, has at least five energy development projects under way – all joined by foreign operators – inside or close to China’s “nine-dash line”, AMTI said.

Philippines wants Australia, Japan to join South China Sea patrols: envoy

Those projects include infill drilling operations carried out by the United Kingdom’s Harbour Energy near Block 12W, which started last September. Other operations include Block 06-1, operated by Russia’s state-owned Zarubezhneft, which took over from Rosneft following the 2019 China-Vietnam stand-off, and the Sao Vang-Dai Nguyet gas and condensate development project, operated by Japanese company Idemitsu Kosan, which began producing gas there in 2020.

In January, Vietnam’s industry and trade minister, Nguyen Hong Dien, reportedly told government authorities and PetroVietnam to speed up the Ca Voi Xanh project off the country’s central coast.

Jointly operated by ExxonMobil, it is potentially Vietnam’s biggest gas project, but may draw protests from Beijing because it is located in an area Beijing may claim based on a continental shelf from the Paracel Islands.

Amid concerns over its ties with China, Vietnam terminated a number of joint development projects with foreign companies in recent years, but AMTI said Hanoi appeared to be changing its mind.

“The ongoing developments in Nam Con Son [run by Idemitsu Kosan] and the potential start of the Ca Voi Xanh project may indicate a turnaround in fortunes for Vietnam’s struggling offshore energy industry,” it said.