HO CHI MINH CITY - News of the discovery of
a new offshore oilfield in northern Vietnam may be
drawing toasts at home, but it threatens to add fuel to
a longtime controversy with China over a territorial
dispute in the South China Sea.
Just a day after
last Wednesday's announcement of the find by a
partnership of oil companies from Vietnam, Malaysia,
Singapore and the United States, a Chinese government
spokeswoman made clear Beijing's position toward future
oil exploration in the region.
seriously concerned and strongly dissatisfied," Foreign
Ministry spokeswoman Zhang Qiyue said. In contrast, an
official with the oil companies called the oil find a
"lucky" one for Vietnam.
The oil find,
announced by a partnership of companies comprising
Petronas Carigali Overseas of Malaysia, American Technology
Inc Petroleum (ATI), Singapore Petroleum Co
and PetroVietnam's Petroleum Investment and
Development Co (PID), is at the Yen Tu field, about
70 kilometers east of Vietnam's Hai Phong seaport.
According to ATI general director Dinh Duc Huu,
many companies have been exploring Yen Tu for oil and
natural gas but this was the "first oil strike" in the
waters off northern Vietnam. Huu, who estimated
preliminary reserves at 181 million barrels, said most
of the country's daily oil output comes from oilfields
off the country's southern coast.
Vietnam is the
is the third-largest oil producer in Southeast Asia with
output of 400,000 barrels per day. Indonesia, with crude
oil output at 966,465 barrels per day in September, is
the region's No 1 producer, followed by Malaysia.
The partnership, which discovered the oil
in the 14,000-square-kilometer area of Blocks 102 and 106 in
the Yen Tu field, an area close to Chinese territorial
waters, started operations in mid-2000. The companies
have spent about US$20 million on exploration and,
according to Huu, will need $100 million more over the
next two to three years before oil could be removed.
Chinese firms earlier had also struck oil in several
fields near Block 106.
The latest find is west
of China's Hainan Island and, for Beijing, not too far
from the South China Sea, where its territorial claims
cover 80% of the area. The South China Sea is also home
to the much-disputed Spratly Island chain. Six claimants
- China, Vietnam, the Philippines, Brunei, Malaysia and
Taiwan - lay claim to part or all of these islands.
At the height of wariness by China's neighbors
about its intentions, this area used to be considered a
key security flashpoint in the region, especially when
different claimants used different means to strengthen
their presence there.
Tensions rose over actions
such as Malaysia's announcement that it would organize
tours to the region. In the mid-1990s, the Chinese put
up what it called shelters for fishermen on islets
claimed by the Philippines, fueling concerns in the
Association of Southeast Asian Nations (ASEAN) about
increased aggression by China and prompting increased
diplomacy to engage Beijing.
this month to the Vietnamese government's invitation for
public bidding in oil exploration in the South China Sea
is a reminder that while relations between Beijing and
Southeast Asia are much warmer these days, old
territorial disputes are very much alive.
is particularly so for China and Vietnam, whose forces
clashed in the South China Sea in 1988 and 1992, and
where on both occasions the Chinese emerged victorious.
Beijing has signaled its intent to assert its
control over the South China Sea in case oil and gas are
found there. China, having already declared the Paracels
to be part of its historic waters after seizing the
small island chain from Vietnam, now considers them part
of its nearby island province of Hainan.
year, China and Vietnam agreed to keep the status quo in
the region and abide by the Declaration on the Conduct
of Parties in the South China Sea, which was signed by
China and ASEAN in 2002 after years of refusal by the
Chinese to discuss the issue multilaterally. The
Southeast Asian grouping considers the document vital to
avoiding moves that add to tension in the disputed
Now China is invoking the same document,
reflecting its worries that oil exploration involving
foreign companies dealing with Vietnam would undercut
its claims. China's spokeswoman Zhang Qiyue urged Hanoi
to "correct its wrong conduct" and abide by the
consensus reached in the declaration.
known to all, China has indisputable sovereignty over
the Nansha Islands and the adjacent waters," the Chinese
official said. "The above action by the Vietnamese side
constitutes an infringement upon China's sovereign
rights and maritime rights and interests."
calls the Spratly Islands Nansha, while Vietnam calls
them Truong Sa. Both countries have fielded historical
and archeological evidence to support their claims in
the disputed waters.
Zhang Qiyue has asked
Vietnam to "cease to adopt any unilateral action that
would complicate or give rise to further expansion of
the disputes". She also called on international
petroleum companies to "cease to do anything that would
impair China's sovereign rights and maritime rights and
Of late, Vietnam been offering
new investment opportunities for foreign crude-oil and gas
At a Hanoi seminar on October
15, PetroVietnam invited foreign companies to Vietnam's
2004 Licensing Round, which covers nine blocks in Phu
Khanh Basin, an area the government said may hold
the equivalent of a sixth of the nation's total oil
and natural gas reserves. The deadline for bids was set
for next March 31.
"Phu Khanh Basin may contain the
equivalent of 5.4 billion barrels of oil, or 16% of the
33.6 billion estimated to lie in Vietnam's continental
shelf," Tran Duc Chinh, PetroVietnam's acting general
manager for exploration, said in an interview.
The nine blocks, named 122 to 130, cover
about 10,000 square kilometers and are 600km northwest
of Ho Chi Minh City. According to PetroVietnam chief
executive Tran Ngoc Canh, they are at an "early
But as PetroVietnam vice
president Nguyen Fang Lieu remarked: "When oil prices
are high, the efficiency of investment increases."
Record-high oil prices of more than $50 a barrel will
probably spur interest from oil companies in the Phu
Khanh Basin, officials said.
Korea's biggest oil refinery has already expressed its
interest. Chey Tae-won, chairman of SK Corp, won a pledge by
Tran Ngoc Canh to push for joint exploration activities
in Vietnam's offshore oilfields. So far, PetroVietnam has
signed 43 contracts with foreign firms to carry out
exploration and production operations in shallow-water
areas with a depth of less than 200 meters.