Gas and oil rivalry in the East China
Sea By Kosuke Takahashi
TOKYO
- Current explorations of an offshore gas field in the
East China Sea by both China and Japan have recently
strained relations between the two powerful nations. The
tension over sovereignty of this disputed gas field
appears to be on the rise, exacerbating mutual mistrust
dating back to the Sino-Japanese War and World War II - and not allayed
by China's meteoric economic rise and voracious appetite
for oil and gas.
While Japan is concerned that
Chinese drilling could siphon off natural gas from
Japan's territorial seabed, Beijing considers Tokyo's
claim as infringing on its interests and sovereignty.
China appears to believe that Tokyo feels threatened by
China's enormous economic development and is trying to
contain it, at least in the East China Sea. This
distrust and petroleum rivalry could lead to further
serious problems unless both countries swiftly reach
some political agreement on the development of the gas
field.
The troubled, indefinable
boundary The issue first arose in August 2003
when the Chinese government concluded development
contracts with oil development companies in China and
other countries, including oil majors Royal Dutch/Shell
and the United States oil company Unocal, for
exploration and production gas projects in the East
China Sea worth billions of dollars. The Japanese
government has since expressed concerns that the fields
may encroach upon Japan's exclusive economic zone (EEZ),
and Tokyo officially asked Beijing for precise data on
the location of those fields, but Beijing has declined
that request.
The issue surfaced again in early
June this year when Japan confirmed that Beijing has
started constructing a drilling facility in the area
within China's EEZ, four kilometers from Japan's claimed
center line between each country's coasts. In addition,
Japan recently confirmed that Beijing has started
constructing drilling facilities at another site,
fueling concerns that it will launch similar projects in
the near future.
As tensions increased, Chinese
Foreign Minister Li Zhaoxing proposed when first
visiting Japanese Foreign Minister Yoriko Kawaguchi on
June 22 that China and Japan cooperate in exploring the
oil and natural gas reserves in the East China Sea. But
instead of accepting that offer, Kawaguchi requested
that China provide the exact locations, depths and other
related data of its offshore drillings underway in the
East China Sea, fearing lest that China may have
violated Japan's interests in tapping marine resources.
But Li did not give any further details, according to
the Hong Kong press reports.
The Japanese
government appeared to conclude that China is collecting
oceanographic data for possible submarine warfare around
that area, which Japan considers strategically essential
for China to boost its military presence vis-a-vis
Taiwan as well as the United States, according to
conservative Japanese media, such as the Sankei Shimbun.
The disputed gas field is in the vicinity of Taiwan and
the disputed Senkaku Islands, which are claimed by both
countries. The Japanese government seems to believe this
was why China has refused to give any data and
information on its oil and gas development in the
region.
On July 7, Japan started exploring its
own EEZ in the East China Sea for natural gas by sending
survey ships, apparently seeking to counter ongoing gas
exploration by China at a nearby location. The following
day in Beijing, Chinese Vice Foreign Minister Wang Yi
summoned Japan's ambassador and delivered an official
protest, criticizing Japan's "act that infringed upon
China's interests and sovereignty".
Behind this
skirmishing are the conflicting views of the two
countries on where the demarcation line should be placed
between the EEZs of the two countries. Both have been at
loggerheads over the boundaries. While Japan defines it
as the line marking an equal distance from the coasts of
the two countries, China claims its EEZ extends to the
edge of the continental shelf. The gas field in
question, named Chunxiao, is located four kilometers
inside the Chinese side of the EEZ boundary claimed by
Japan.
Legally, the United Nations Convention on
the Law of the Sea allows coastal countries to regulate
catch and seabed resources in an economic zone extending
200 nautical miles, or 370 kilometers, from their
shores. But Beijing and Tokyo, both of which signed the
convention in 1996, have not agreed on where their sea
border lies. The UN says it will decide on global
offshore territorial claims by May 2009. In February
2001, Japan and China only agreed to give each other two
months' prior notification with regard to maritime
scientific research activities in waters around the two
countries.
For this reason, China claims the
Chunxiao gas field does not cross the border line and
would not even if the Japanese method of demarcation is
adopted because there are still four kilometers to
Japan's claimed center line (although China has never
accepted the legitimacy of the Japanese demarcation).
Meanwhile, Japan says it has a right to claim its share
if resources in the Chinese EEZ are found to straddle
the intermediate line. Japan has asked China to provide
experimental drilling data, though these efforts have
been in vain because it decided to explore the site by
itself and has started it already.
China, the
world's No 2 oil consumer after the US China, the
world's No 2 oil consumer after the US, is racing to
develop natural resources to meet its rapidly growing
domestic demand for energy as the economy races ahead.
It is believed that since last summer China has stepped
up development of gas fields in the East China Sea. That
was when China suffered severe energy shortages,
especially a shortage of electricity. China is still in
dire need of electric power for its heavy industry
development and manufacturing sector. Chinese experts
believe the 2004 energy shortfall to be at least as
severe as that in 2003. Last Friday China's commercial
hub of Shanghai, grappling with a worsening power
crunch, ordered its two largest auto makers to shut down
production for more than a week. The sharp energy
shortfall will exist until 2006, according to a recent
prediction issued by China Electricity Council.
Moreover, at the National People's Congress in
March, China pointed to the development and protection
of marine resources as one of the government's priority
issues, underscoring the country's growing sense of
crisis over energy security. The Institute of Energy
Economics in Japan also forecasts that oil consumption
in China will grow to 590 million metric tons in 2020
from 220 million tons in 2000, and the country's oil
imports will soar to 450 million tons during the same
period, compared with 250 million tons for Japan.
Furthermore, China is expected to become a net importer
of natural gas by 2010. China is also expected to become
a net importer of gasoline within this year. China's
dependence on the region's oil is expected to reach 50%
in 2020 from 15% in 2000, according to experts.
More recently, in the January-June period, fuel
oil imports hit 16.37 million tons, a whopping 53.5%
rise on the same period a year ago, according to the
latest data from Chinese customs.
Meanwhile,
Japan, the world's second-biggest economy, has almost no
natural resources of its own and relies on the Middle
East for nearly 90% of its oil as an energy source.
Tokyo hopes to develop other sources, and has been
negotiating for access to oil and natural gas reserves
with Russia and Iran, among others. Japan is also
competing with China over Russia's project to extend a
crude oil pipeline in Eastern Siberia. While China has
proposed stretching the pipeline inland to Daqing, Japan
is seeking an extension to Nakhodka, a port city facing
the Sea of Japan.
For Japan, no choice but to
work together Japanese experts believe Japan is
facing a tough question on how to deal with its
neighbor, which is emerging as an energy guzzler. The
problem is that the Chunxiao project, which has jangled
Tokyo's nerves, also involves several US and European
energy giants and is already at the advanced stage. Gas
is scheduled to be pumped to China as early as next
year. It is also not clear whether Japan can chip in at
this late stage, even if it accepts China's
joint-exploitation proposal. Some skeptics say China is
only playing for time, not giving Japan any data on the
project.
China has also been operating research
vessels within Japan's EEZ without notifying the
Japanese government in advance. These activities have
served to make Japan wary about Beijing's proposal for
joint development. Last Wednesday, Japan's Chief Cabinet
Secretary Hiroyuki Hosoda said the Japanese government
is planning to lodge a stronger protest with Beijing
over the repeated presence of Chinese survey ships in
Japan's EEZ.
But there are some signs that two
counties are beginning to move toward cooperation in
energy to find complementary positions. For example, in
the private sector, Japan's largest oil refiner Nippon
Oil Corp teamed up with PetroChina Co this month in
refining and exporting crude oil. The tie-up will solve
the dual problems of a refining capacity shortage in
China and excess capacity in Japan.
To be sure,
on the energy issue, Japan and China have no choice but
to work together, although occasional friction is likely
because the matter is complicated by historical issues
and the territorial dispute. If the current standoff
continues, Japan might want to accept China's joint
project proposal, taking the opportunity to expand
cooperation in resource development with China and to
improve the climate for future cooperation. The two
countries surely need to explore ways to cooperate,
rather than compete for energy resources in Northeast
Asia, which as a whole will need to import about 70% of
its oil from the Middle East in 2020. Under the
circumstances, it would be more beneficial for both
Japan and China to forge an alliance in price
negotiations than to compete. For Japanese companies in
the energy sector, China is a huge, lucrative market.
And for China, Japan's energy-saving and
environmental-protection technology must be very
attractive.
Kosuke Takahashi is a
former staff writer at the Asahi Shimbun and is
currently a freelance correspondent based in Tokyo. He
can be contacted at kosuke_everonward@ybb.ne.jp.
(Copyright 2004 Asia Times Online Ltd. All
rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
War II - and not allayed
by China's meteoric economic rise and voracious appetite
for oil and gas. 
