China, Oil and the South China Sea

The South China Sea, which has an area estimated at 3,500,000 square kilometers (1,200,000 square miles), is one of the world’s most important shipping transit areas. According to GlobalSecurity.org, the South China Sea has 7.5 billion barrels of proven oil reserves and 145.5 trillion cubic feet of natural gas.

However, undiscovered oil reserves could be as high as 213 billion barrels, according to a U.S. Energy Information Administration report in 2008. Presently, Brunei, China, Malaysia, Taiwan, the Philippines and Vietnam claim maritime rights over this area.

Since China is the dominant country in the region, it is inevitable that conflicts arise with the other countries involved. These conflicts will only tend to increase, as China’s energy demands increase. (The country’s energy consumption is projected to double by 2030.) In addition, China considers the South China Sea an obvious extension of her regional power.

Among all the countries involved, the greatest potential for conflict exists between China and the Philippines and between China and Vietnam.

The tension between China and the Philippines arises over which country has the authority to allow local and foreign companies to exploit valuable oil and gas reserves in a disputed zone of the South China Sea.

The dispute was recently triggered when Manila stated that it was preparing to issue exploration licenses for 15 petroleum blocks, three of which are in the South China Sea. Beijing protested, claiming that two of the auctioned blocks were under its jurisdiction, and are part of the disputed Spratly Islands. Philippine officials insist that the two blocks do not belong to China.

The Spratly Islands are important for several reasons. They have important reserves of oil and natural gas, they constitute a productive area for world fishing and commercial shipping, and coastal countries could benefit from an extended continental shelf. China, Taiwan and Vietnam also claim historical sovereignty over the islands.

China, Vietnam and the Paracel Islands

At the core of the problem between China and Vietnam is the dispute over the Paracel Islands (also called Xisha Islands), now under the administration of China’s Hainan Province.

Both China and South Vietnam controlled part of the Paracel Islands before 1974. However, following a brief confrontation in which 71 soldiers were killed, China took control of the entire Paracel archipelago, and now considers the dispute a closed issue. Vietnam still questions China’s control over the islands.

The archipelago is roughly equidistant from the coastlines of China and Vietnam. Although the islands have limited military value, geological surveys indicate the presence of significant gas and oil reserves in the surrounding waters. The archipelago is also surrounded by rich fishing grounds.

Despite the danger of clashing with China, Vietnam and the Philippines have continued to explore for oil and natural gas in the South China Sea’s waters.

To stimulate progress on the issues related to rights over the sea’s islands, a Declaration on the Conduct of Parties in the South China Sea was signed in November 2002. Although the declaration contributed to a reduction of tensions, it fell short of establishing a binding code of conduct.

The United Nations Convention on the Law of the Sea (UNCLOS), which took effect in 1994, established procedures for countries with coastlines to submit claims for their continental shelf to be extended 200 nautical miles from their shores. In May 2009, both Vietnam and Malaysia submitted claims under UNCLOS, but they were immediately contested by China, which called on the United Nations not to consider them.

The economic and military power of the Southeast Asian countries combined is still rather small compared to China’s. Securing rights over vast areas of the China Sea would help China expand its already significant economic and strategic influence in the region. Given the multiplicity of parties and the intricacy of the issues involved, it seems that only multilateral agreements for development will end the present status quo on issues of sovereignty and control of resources.

The choice, then, is between confrontation and joint development for all countries involved in such a critical area of the world.