Territorial disputes in the South China Sea will not hold back oil exploration

China, Vietnam, Malaysia, Taiwan, the Philippines, Indonesia and Brunei have all staked competing claims over the 11 billion barrels of oil and 190 trillion cubic feet of natural gas that have yet to be tapped in the South China Seas.

By Mark Brierley

(Photo By An oil refinery in the South China Sea as seen from Seria, Brunei Darussalam. Photograph: Getty Images.)

Natural resources have been cited as the reason for many a territorial claim through the centuries – whether that be gold, water or oil. Tensions in the South China Sea have been steadily rising over the past few years, as successive geological surveys have revealed massive oil and gas reserves, lying beneath the waves.

No fewer than seven countries bordering the sea – China, Vietnam, Malaysia, Taiwan, the Philippines, Indonesia and Brunei – all stake competing claims over the proven 11 billion barrels of oil and 190 trillion cubic feet of natural gas that have yet to be tapped. The US Geological Survey estimates these figures could yet be revised upwards as other areas of the region are explored.

With energy consumption rising rapidly in several of these countries, the impetus for claiming these reserves is clear. The total installed electricity generation capacity in China doubled between 2005 and 2011, whereas Vietnam currently imports 60 per cent of its oil, a figure which the government is trying to reduce by developing its own resources and producing more oil domestically.

But all that has been produced so far is deadlock. These nations do not even agree on a name for the sea. Most often called the South China Sea internationally, it is also known as the East Sea in Vietnam, the West Philippine Sea and the South Sea in China.

Tensions have risen as a result of Vietnamese protests over disruption to its exploration activities from the Chinese fishing fleet. The Philippines have also voiced concerns over the increasing presence of the Chinese in the area around Scarborough Shoal, which is claimed by both countries. With China’s ever-increasing naval power, there are fears that the disagreement could escalate into the sort of dispute seen with Japan in 2012, over the Senkaku Islands, claimed by both countries.

Christopher Hughes, Professor of International Politics and Japanese Studies at the University of Warwick called the situation “the most serious for Sino-Japanese relations in the post-war period in terms of the risk of militarised conflict”, with tensions reaching their peak when Japanese and Chinese coast guard vessels engaged and collided, plus the scrambling of fighter jets on both sides to monitor other ships in the area.

Fearful of similar escalation in the South China Sea, the ASEAN community, made up of Vietnam, Malaysia, Taiwan, the Philippines, Indonesia and Brunei, have actively seeked to engage with China on a diplomatic level to resolve the dispute at this month’s 16^th ASEAN-China Summit in Brunei. First things first, Benigno Aquino III, President of the Philippines, has diplomatically decided to refer to the region as “this sea known by many names”, but was clear in his desire to resolve the conflict, or risk damaging the region’s economic growth. “Our development as a region cannot be realised in an international environment where the rule of law does not exist,” he said, pushing for a Code of Conduct to be drawn up under the watchful eye of the UN, designed to settle each country’s claim.

China, whose claim over the Sea, is by far the largest, has the most to lose from any formal international agreement, so has actively begun seeking cooperation with neighbouring states on the joint development of hydrocarbons. Chinese Premiere Li Keqiang last week visited Hanoi with the aim of boosting economic cooperation between Vietnam and China, following similar agreements worth $5 billion with Malaysia and $28 billion with Indonesia.

This follows rocky relations between Petrovietnam and China National Offshore Oil Corporation (CNOOC), who in 2012, called for international bids to explore the Gulf of Tonkin, an area claimed by both countries. Relations have since improved though, with the extension and expansion of a joint agreement to explore the gulf. The agreement will now be in place until 2016 and expand the area covered from 1541km²to 4076km².

Such agreements could be a sign of things to come, with China realising that joint development of contested resources is better than no development at all. Its recent diplomatic blitz with members of the ASEAN community could yet bear more fruit, or more oil.