“Seeking bids for the exploration areas is an illegal act that “seriously violated” Vietnam’s sovereign rights, Ministry of Foreign Affairs spokesman Luong Thanh Nghi said in comments posted on the ministry’s website yesterday. The company should “immediately cancel” the invitation, he said.” Bloomberg report
Just days after Vietnam’s National Assembly passed a national law formalising a declaration of sovereignty over the Hoang Sa (Paracel) and Truong Sa (Spratly) islands, China National Offshore Oil Corp. (CNOOC) has put nine offshore blocks on offer near the Vietnamese coast in the disputed South China Sea.
An announcement by CNOOC on 23 June indicated that nine blocks in “waters under jurisdiction of the People’s Republic of China” were “available for foreign cooperation” in 2012.
The blocks, seven in the Zhongjiannan Basin and two in the Wan’an and Nanweixi basins to the south, lie off the Vietnamese coast. According to a map and coordinates provided by CNOOC, they appear to overlap large swathes of Vietnam’s 200 nautical mile (370 km) exclusive economic zone (EEZ).
“Clearly, the announcement of the blocks is provocative, though no doubt [it has been] in the works for some time,” Jonathan London of the Southeast Asia Research Centre at the City University of Hong Kong told Interfax on Tuesday. “Beijing has its foot on the pedal and Hanoi is responding in turn, no doubt having anticipated Beijing’s increasingly aggressive behaviour.”
CNOOC’s evolving role
The move by CNOOC marks a further escalation in the tensions between China and Vietnam over claims to the resource-rich South China Sea, and once again sees the state-owned energy giant stepping into the realm of policymaking.
Monday’s statement is evidence of China’s increasing willingness to push the boundaries on its claims despite the recent agreements, Rod Wye, associate fellow at Chatham House and former first secretary at the British Embassy in Beijing, told Interfax. “The basic truth is that China is a bigger player, its strength has been growing, and it is becoming increasingly capable of pushing its agenda in the region,” said Wye.
CNOOC Chairman Wang Yilin had already waded into the heated debate over the South China Sea in May, saying CNOOC would “strive to protect the nation’s offshore oil interests”, as he inaugurated China’s first deep-sea drilling operation with a domestically manufactured rig.
Wang remarked that “large deepwater drilling rigs are our mobile national territory and strategic weapon for promoting the development of the country’s offshore oil industry”, and added that drilling would contribute to ensuring the country’s energy security and sovereign right over its territorial waters.
The close relationship between CNOOC and the Chinese government means the latter is likely to have given its consent in the matter, added Wye. “However, the Chinese government will retain some measure of deniability. That way, if the issue escalates they can deny they’d consented to the offering of the blocks.”
CNOOC’s exploration of the blocks and invitation to develop them is consistent with the Chinese national strategy of securing as much oil and gas as possible, said Michael Wu, a Hong Kong-based director with Fitch’s Asia Pacific corporate team.
“In terms of the blocks being deepwater, CNOOC wants to introduce more partners to speed up exploration and production. Of course, with foreign partners coming in, CNOOC also has the opportunity for technology transfer,” Wu told Interfax.
“Advanced technology is going to become increasingly important in the future, as the era of easy oil is over. We’re looking at more difficult, more technical reservoirs that are going to require more sophisticated technology.”
A spokesperson for CNOOC’s listed arm declined to confirm to Interfax on Tuesday whether CNOOC had received expressions of interest from foreign companies for any of the new blocks on offer but, although the nine offshore blocks appear to be among some of the most controversial yet to be offered in the South China Sea, foreign operators have not shied away from the region in recent years.
Indeed, Italian major Eni announced on Monday it had agreed to farm into two exploration blocks in the highly prospective offshore Song Hong and Phu Khanh basins. The deal, subject to Vietnamese government approval, would give the company a 50% stake and operatorship of the blocks.
“Despite the risks stemming from ongoing disputes, an increasing number of foreign companies have seized the prospect of energy exploitation, and have entered joint development contracts in the South China Sea,” Giulia Zino, a senior Asia analyst at London-based consultancy Maplecroft, told Interfax last week.
Zino cautioned, however, that “with foreign companies increasingly involved in exploration in disputed areas, the risk of being embroiled in political and diplomatic friction is also growing”.
China and Vietnam had previously reached an agreement on a framework for dialogue on resolving the long-running territorial dispute after a visit to Beijing by Vietnamese leader Nguyen Phu Trong in October.
Interfax understands, however, that a Vietnamese diplomatic delegation arrived in the UK last year looking to drum up support for its maritime claims in the South China Sea. That, coupled with last week’s tit-for-tat exchanges, would suggest consensus between China and Vietnam is drifting further apart.
“Whether this [announcement] leads to a substantial worsening in relations probably depends on Beijing’s behaviour at sea and how Hanoi and other parties respond,” said London.
“In the meantime, it will be interesting to see whether the proximity of these blocks to Vietnam will result in another ‘own goal’ for Beijing, reminding the region and the world of the fundamental illegitimacy of its claims,” London added.
Some analysts expressed a more sanguine attitude, however, stating that the situation was not necessarily worrying for the moment. “Despite this move, it could be a long time before any work is done,” Gary Li, head of current intelligence and marine and aviation specialist at Exclusive Analysis, told Interfax.
“Some of the indicators of future action would be the hiring of exploration vessels (there are several that operates in the region that hire themselves to the Chinese, Vietnamese and every other nation that’s willing to pay), increased patrols of CMS [Chinese maritime surveillance] forces in the blocks and, of course, the moving of CNOOC assets closer to the blocks,” he added.