• STRATFOR ANALYSIS

    China uses deep-sea oil exploration to push its maritime claims

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    China is moving forward with unilateral energy exploration in the South China Sea and is using the placement of a deep-sea oil rig to assert its claims to the disputed Paracel Islands. The move has concerned Vietnam, which also claims the waters and islands in that area, and the United States. Beijing’s decision will likely prompt Vietnam to deploy its coast guard or naval vessels to assert its own claim to the area and accelerate its efforts to draw in foreign partners for oil exploration and production. But Beijing is calculating that Vietnam will be unwilling and unable to make any serious attempt to stop the Chinese drilling.

    Beijing continues to rely on its growing military and technological capabilities to test its maritime boundaries. Along with responses and reactions from neighboring countries and outside parties, this military reliance will continue to shape the region’s security environment, even though Beijing is maneuvering carefully to avoid outright conflict while exerting its authority.

    Relations between China and Vietnam have been relatively smooth over the past year, but Beijing’s announcement that it would deploy a deep-water oil rig some 20 nautical miles south of the disputed Paracel Islands has rekindled tensions. On May 3, Beijing issued a notice that China National Offshore Oil Corp.’s 981 oil rig was to carry out drilling operations from May 4 to Aug. 5 and that all ships must stay outside a three-mile radius of the operations.

    Vietnam protested the notice, claiming the area is well within its 200-nautical-mile Exclusive Economic Zone, and demanded that China stop drilling. Coast guard ships from both countries reportedly engaged in a standoff 17 nautical miles south of China-controlled Triton Island in the Paracels. Meanwhile, a US State Department spokeswoman called the Chinese move “provocative.”

    Deep-sea exploration

    The deployment of the CNOOC 981 oil rig is Beijing’s first step toward unilateral deep-sea oil exploration in the disputed areas of the South China Sea. Until recently, little formal deep-sea exploration had occurred in the South China Sea, partly because of long-standing territorial tensions and unclear commercial viability. For a long time, no claimant country, including China, had the indigenous equipment and technology to carry out these kinds of operations. Before 2013, China’s energy exploration was primarily confined to shallow waters adjacent to its southeastern coast. But deep-sea capability has become necessary as China searches for new energy sources to bolster its energy security, a search that has taken place alongside its desire to reshape the political and security environment in the South China Sea. Beijing sees deep-sea exploration as an important tool to substantiate China’s physical presence (and thus, authority) in the disputed waters.

    To accompany Beijing’s strategy, in the past few years China National Offshore Oil Corp. has shifted its focus toward developing its deep-sea exploration capability. Though still in early stages, China National Offshore Oil Corp. has partnered with foreign companies and increased indigenous development to expand its technological reach far beyond that of other claimants, including the Philippines and Vietnam. Currently, China National Offshore Oil Corp. is equipped with two deep-sea oil platforms, CNOOC 981 and Nanhai VIII, which can drill in water depths of up to 3,000 meters (9,800 feet) and 1,400 meters, respectively. Meanwhile, Chinese deep-sea production made progress earlier this year with a joint exploration between Canadian firms Husky Energy and Calgary in the Liwan 3-1 gas field in an undisputed area in the South China Sea.

    Consolidating Control Over Paracels

    Many of the resources in the South China Sea are speculative, since little actual exploration has taken place. But the region around the Paracels is one of the areas in the South China Sea where oil reserves are more certain, and the oil field at the center of the current controversy is reportedly about 1,040 meters deep.

    Such drilling activity suggests that Beijing is capable of carrying out unilateral exploration in water of equivalent depth, if not deeper, wherever it deems it viable. But Vietnam is most concerned with China using the exploration near the Paracels to enforce its control in the disputed region. Hanoi fears that such exploration, in addition to Beijing’s superior naval and coast guard presence, would put Vietnam in a far inferior position to protect its claim to the islands.

    China took control of the Paracel Island chain in the 1970s, but it did not begin to formally enforce its claim until the late 2000s, when it undertook a broader, more aggressive maritime expansion plan. Beijing stepped up its military presence in and around the islands and established the Sansha administrative region, which encompasses the Paracel Islands, Spratly Islands and the Macclesfield Bank, and falls under the jurisdiction of Hainan province, as a symbol of China’s de facto control.

    With Beijing now able to carry out unilateral deep-sea exploration around the Paracels, Hanoi’s only options for developing its physical presence in the area would be limited to either partnering with China—a move that would acknowledge Chinese authority—or seeking a different partnership. Joint exploration with foreign companies has tended to falter because of economic and military threats from Beijing, in addition to uncertainty regarding the outcome of any exploration. In short, Beijing is forcing Vietnam to accommodate or at least tolerate China’s control over the Paracels.

    Beijing pushes its boundaries

    The case of the Paracels is just one example of how Beijing is firming up its presence in the South China Sea and gradually eroding other claimants’ ability to challenge its supremacy.

    But even as Beijing ambitiously claims the entire South China Sea, bounded by the so-called “nine-dash line,” it has no real presence on any island (besides a few atolls and reefs) in the distant Spratly Island chain. In addition to China, Malaysia, the Philippines, Vietnam, Brunei and Taiwan have claims in the island chain. China’s navy is not good enough to overcome the logistical challenges such distances present, so its ability to project its dominance throughout the maritime sphere is limited.

    Instead, Beijing’s strategy seems to consist of three steps. First, it uses the nine-dash line as a historical justification for its intrusions into disputed waters. Second, it enforces its claim in tactically advantageous areas where it has an actual presence, such as the Paracels and the Scarborough Shoal, which it seized from the Philippines in 2012. Third, it continues to develop its military and technological capabilities to carefully push its maritime boundaries farther without antagonizing all of its neighbors at once.

    The careful way in which China in enforcing its claims in the South China Sea may allow it some space to avoid unmanageable naval tensions or conflicts with its neighbors as well as other interested parties such as the United States, Japan and India. However, as overall territorial pressure in the South China Sea continues to build, China’s neighbors will be forced to seek outside assistance and military cooperation to counterbalance a more aggressive China. This can be seen in Vietnam’s approaching foreign energy companies from Russia and India to explore the South China Sea and seeking military cooperation with other countries. Meanwhile, the Philippines is increasing military exchanges with Washington to prepare for a potential backlash from China while Manila seeks international arbitration to undermine Beijing’s claim. Altogether, as China pushes its boundaries, reactions from its neighbors and outside parties will continue to shape the regional security environment.

    Republishing by The Manila Times of this analysis is with the express permission of STRATFOR

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