HANOI - Just when it seemed China and Vietnam had buried their conflicting
claims to the Spratly Islands, Beijing is contesting a new Hanoi-tendered,
BP-led, US$2 billion natural-gas project near the rocky group of islands and
reefs in the South China Sea. The flare-up marks perhaps the strongest
indication yet that Beijing's soft-power overtures toward Southeast Asia are
hardening when it comes to energy-security concerns.
The contested Moc Tinh and Hai Thach gas fields, in the Nam Con Son Basin about
370 kilometers off Vietnam's southeast
coast, are both run by British energy giant BP through a production-sharing
contract with state-owned PetroVietnam and in partnership with US oil firm
ConocoPhillips.
The Chinese Foreign Ministry on April 12 claimed that the project encroached on
its territory, saying "any unilateral action taken by any other country in
these waters constitutes infringement into China's sovereignty, territorial
rights and jurisdiction. We are firmly opposed to this." Hanoi has countered
that the multinational-led project lies in its territorial waters and exclusive
economic area, consistent with the 1982 United Nations Convention on the Law of
the Sea.
Beijing first lodged its complaint during a visit by members of the Vietnamese
National Assembly, symbolically led by its chairman, Nguyen Phu Trong. The
contested project lies adjacent to the Lan Tay gas field and pipeline, which
commenced construction in the late 1990s and came on-stream in 2003. Until now
it had not stirred any official complaint from China.
Led by BP and in partnership with PetroVietnam, Lan Tay is Vietnam's first
large-scale gas-supply-chain project, piping fuel to the 3,800-megawatt
combined-cycle power plant at the Phu My industrial estate outside Ho Chi Minh
City that is popular with foreign investors. The pipeline also takes gas from
the Korea National Oil Corp's Rong Doi field.
The contested BP-led Moc Tinh and Hai Thach project, which will include a new
pipeline designed to deliver gas to a common processing facility onshore, is
scheduled to supply gas to new power plants totaling 2,640MW at Nhon Tach, some
60km east of Ho Chi Minh City. Vietnam's offshore oil reserves are dwindling
and Hanoi is increasingly looking to natural-gas projects to help fill the gap.
According to projections compiled last year by the Asia Pacific Energy Research
Center, Vietnamese energy planners aim to have 23,000MW of power-generation
capacity installed by 2010, of which 7,000MW will be fueled by natural gas. By
2020, Hanoi hopes nearly to double that capacity to 44,000MW, with natural gas
providing 12,000MW of the total power, according to the same projections.
At the same time, China has launched a global investment spree to meet its
surging energy appetite, including recent politically risky forays in Africa.
Beijing has expressed its desire to source more of its fuel needs from Asia,
because of its security concerns about shipping through the congested Malacca
Strait between Indonesia's Sumatra island and peninsular Malaysia. And securing
new fuel sources in the nearby Spratly Islands would help to alleviate those
concerns.
Old enemies, new friends
Relations between neighboring Vietnam and China have long been tense, including
recent armed skirmishes in the late 1970s and '80s. The two sides fought a
brief but bloody border war in the wake of Vietnam's invasion of Cambodia,
which ousted the Beijing-backed Khmer Rouge regime. In 1988, Vietnam and China
fought a brief naval battle over the contested Spratly Islands in the
south-central area of the South China Sea.
In line with China's regional economic charm offensive, more recently
diplomatic relations have warmed and commercial ties have blossomed. The two
sides have in recent years launched "friendship and cooperation" meetings,
including regular reciprocal visits from each country's top government leaders.
Improved diplomatic ties have paved the way for Vietnam to develop new
transport infrastructure in its northern regions, aimed at better connecting
its manufacturing base with China's booming southern provinces. Bilateral trade
reached $10 billion in 2006, up more than 21% year on year.
Overlapping maritime claims still overshadow those improved relations, as the
new dispute over Vietnam's Nam Con Son Basin natural-gas project shows.
Notably, progress has been made on long-contested land boundaries. China this
year ratified a treaty signed last October defining precisely the point where
the national borders of China, Vietnam and Laos meet. But settling maritime
boundaries, particularly concerning the Spratly Islands, has proved more
difficult precisely because access to potentially abundant oil and gas
resources is at stake.
During the 1990s, disputes over the Spratly Islands were commonplace, with
different regional actors at times forcefully staking their claims. Recently
China, Vietnam and others with overlapping claims there - including Malaysia,
Brunei and the Philippines - agreed under the Association of Southeast Asian
Nations' (ASEAN's) Declaration on the Conduct of Parties in the South China Sea
to resolve any future disputes peacefully.
The Nam Con Son Basin area, the focus of the current disagreement, is a
potentially important regional energy source. Most of Vietnam's present oil
production is based closer to shore in the Cuu Long Basin, but in Hanoi's drive
to secure new energy sources the more distant Nam Con Son Basin has become a
focus of Vietnam-tendered, multinational-led exploration. Shell and ExxonMobil
are operating in blocks that Vietnam claims but could also be subject to claims
by Beijing.
Despite the high stakes, it does not appear that the latest bilateral squabble
will escalate into full-blown saber-rattling - as past contested claims have,
including China's seizure of the Paracel Islands from Vietnam in 1974. The Nam
Con Son issue was discussed at a regular annual meeting between senior
foreign-ministry officials from the 10 ASEAN member states and China in the
Chinese city of Anhui between Monday and Wednesday last week. The matter was
examined in the context of the Declaration on the Conduct of Parties in the
South China Sea.
Beijing said shortly after making its claim to the territory on April 12 that
the two sides had a consensus to resolve their disputed maritime boundaries
around "the principle of shelving differences and seeking common exploration".
The Chinese Foreign Ministry spokesman said in mid-April, "We should not take
any unilateral action that will further complicate the situation."
A few days afterward, a delegation of Vietnamese government officials and army
officers visited the Spratlys, sent ostensibly to celebrate the 32nd
anniversary of the islands' liberation from the old US-backed government of
South Vietnam, but which also entailed an inspection of troops in islands just
to the north of the archipelago stationed clearly to defend against potential
Chinese expansionism.
Andrew Symon is a Singapore-based journalist. He is completing a book on
energy in Southeast Asia.
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