On April 5, Russian energy
giant Gazprom plunged into the maritime dispute
between Vietnam and China with the announcement it
would help state-owned PetroVietnam develop a
lucrative off-shore energy field. By taking a
major stake in the 5.2 and 5.3 blocks located in
the Nam Con Son basin, Gazprom brings both
exploration know-how and Russian political clout
to the deal.
The entire Nam Con Son Basin
lies within Vietnam's 200-mile exclusive economic
zone (EEZ) under international law. The
eastern portion of the shallow
water basin where the two blocks are situated,
however, is on the Chinese side of the U-shaped,
nine-dash map Beijing uses as the basis for its
claim over most of the South China Sea. [1]
Just five days after the Gazprom
announcement, China's Foreign Ministry stated its
opposition to "the exploration and exploitation of
ocean oil and gas resources in Chinese sea
territories without our permission" and said it
had "made representations and taken measures to
stop these illegal activities."
Similar
pressure from China caused United Kingdom-based BP
to delay production and eventually withdraw from
blocks 5.2 and 5.3 in 2009, forcing Vietnam to
find a new international drilling partner. In a
batch of US Embassy in Hanoi cables released by
the transparency group WikiLeaks, American
diplomats revealed that BP and other Western
companies with business interests in China were
under significant pressure to withdraw from
Vietnam.
The leaked cables speculated that
Vietnam could turn to a non-Western energy company
less susceptible to Chinese commercial pressure.
Gazprom, which is Russia's largest company and
enjoys strong government backing, will likely be
more immune to Beijing's pressure.
In
recent years, Moscow has presented itself as a
reliable friend to Hanoi, one that will not
endanger its national security like China or apply
pressure for improvement in human rights like the
United States and European Union. In return,
Russia has won lucrative contracts to modernize
the Vietnamese military and build the first two
nuclear reactors in the country.
Another
regional power in this evolving great game is
India. Despite vocal protests from Beijing,
Indian-state owned ONGC (Oil and Natural Gas Corp
Ltd) entered into a long-term energy cooperation
deal with PetroVietnam in November 2011. ONGC
reiterated recently that it is moving aggressively
ahead with exploration at blocks 127 and 128,
which are inside Vietnam's EEZ but also straddle
China's nine-dash claim.
Of the private
Western firms with contracts in Vietnam, the most
prominent is Exxon Mobil. At the end of last year,
the US energy giant reported a "potentially
significant" offshore oil and gas discovery at
block 119 near Danang but also overlapping into
waters claimed by China.
Other than a
press release announcing the find, Exxon Mobil has
taken a relatively low-key approach - a
reflection, perhaps, of China's previous warnings
to the US company to stop exploring in the area.
For Vietnam, the participation of foreign
energy firms in offshore exploration is critical.
With its overall energy production beginning to
decline, Vietnam needs to drill further from the
coast to find productive fields and generate
export earnings to fund government coffers.
The presence of Gazprom, ONGC and Exxon
Mobil - symbolizing the commercial might of
Russia, India and the US respectively - is also
important for reinforcing Vietnam's control over
its entire 200-mile EEZ.
High power
stakes Just how much oil and gas lie
beneath the contested maritime area? According to
a much publicized Chinese study, the South China
Sea could hold as much as 213 billion barrels of
oil, or the equivalent of 80% of Saudi Arabia's
known reserves. In a separate BP estimate, the
entire region may also contain 2 quadrillion cubic
feet of natural gas, more than five times the
known natural gas reserves of North America.
Given its massive resource needs, China
seems motivated to seize this entire energy bounty
for itself. From Beijing's perspective, it is
being robbed of around 1.4 million barrels of oil
per day from illicit production by Vietnam,
Indonesia, Malaysia and the Philippines.
According to energy experts, the geology
of the South China Sea has blessed the western and
southern rims of the sea with the most productive
and easy to extract offshore oil and gas fields.
Unfortunately for Beijing, these are the waters
furthest from China and within the continental
shelf of the other claimants.
One way to
possibly lower the heat in the South China Sea
would be through joint exploration. However, that
would require all of the claimants to clarify
their demands and narrow down what areas are truly
under dispute.
To untie the knot of
competing claims over islands and ocean,
researcher Duong Danh Huy has proposed separating
the disagreements over the Paracel and Spratly
archipelago - claimed in whole or part by China,
Taiwan, Vietnam, Philippines, Malaysia and Brunei
- with the disputes over the waters of the South
China Sea.
As tiny uninhabited islands and
rocks, each of the features within the Paracels
and Spratlys would be entitled to 12 nautical
miles of surrounding water. Control of each of
these several hundred 12-mile radii zones would be
negotiated separately from that of the remaining
expanse of the South China Sea, according to
Duong's proposal. All the negotiations would be
guided by international maritime law.
So
far, however, China has shown a preference for
bilateral engagement with individual claimants
over a multilateral solution. To enforce its
maritime claims, Beijing has stepped up actions
seen as intimidation and harassment by outside
observers.
Chinese patrol vessels twice
last year sabotaged PetroVietnam exploration ships
operating within Vietnam's EEZ. In March, China
seized 21 Vietnamese fishermen in disputed waters
and continues to detain them pending payment of a
large fine. Last week, China precipitated a
confrontation with the Philippines near the
disputed Scarborough Shoal in the Spratly
archipelago.
There could be more
confrontation ahead. Following news of the Gazprom
deal, China's Foreign Ministry declared: "We hope
relevant countries will work with us, to avoid
pulling extra-regional countries into the
disputes. We also hope those extra-regional
countries will respect and support dialogue and
negotiation between China and relevant countries,
and try to avoid getting involved."
As
Beijing ratchets up pressure on the smaller
claimants, many of them are banding closer
together, as evidenced by the recent announcement
of joint Vietnam-Philippine military exercises.
Southeast Asian nations are also showing
eagerness to counterbalance China by inviting in
powers from beyond the region. Singapore just
announced that it would host four American
littoral combat ships. Despite its intentions,
Beijing's actions have unleashed a great game in
the maritime commons for energy and security.
Note: 1. Map of Vietnam's
offshore energy fields in relation to Vietnam's
EEZ and China's U-shaped claim, see here:
The Hanoist writes on Vietnam's
politics and people.
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