Attempts to occupy islands by Japanese and Chinese protesters have heightened the conflict over maritime boundaries in the South China Sea.
Japan, China, Vietnam, and the Philippines are ramping up confrontations over which country owns what part of the outer continental shelf (OCS) in the East and South China seas.
The biggest brouhaha is over uninhabited islands claimed by Japan, China, and Taiwan. Protesters from Japan recently occupied one of the islands in the chain and were removed by a Japanese coast guard vessel. In response, China sent patrol vessels from China Marine Surveillance, a coast guard group, to the islands. This same agency has been involved in confrontations with Vietnamese and Philippine ships.
As the demand for oil and gas in the region continues to grow, these conflicts over potential petroleum resources are becoming more threatening, not only offshore China, but also offshore Argentina over the Falklands Islands.
Although the China-Japan confrontation is getting the biggest headlines, Vietnam and the Philippines also are pushed by the Chinese government.
China National Offshore Oil Corp. offered 22 blocks in the South China Sea recently much to the consternation of Vietnam. Nine of the blocks, according to Vietnam, are within the Vietnamese exclusive economic zone. The blocks are well south of mainland China, thus the OCS claim for China would difficult to determine.
In July, China put a military garrison along with a legislative assembly on the Paracel Islands, which also are claimed by Vietnam. The move added to the tensions between the two countries.
The Philippines also weighed in on the dispute Sept. 5 by renaming the waters west of the country. The area is now the West Philippine Sea, according to Philippine President Benigno Aquino III.
He ordered all maps to be redrawn using the new name for the area west of the Philippines, including the contested Spratly Islands and the Scarborough Shoal, which are prime areas for exploration.
In April, China and the Philippines were in a confrontation over the Scarborough Shoal. The new West Philippine Sea is supposed to boost the Philippines claim to the OCS.
US Secretary of State Hilary Clinton tried to persuade China to be more flexible on the maritime boundaries in the South China Sea during a meeting Sept. 5. However, China’s foreign minister, Yang Jiechi, reiterated China’s claimed sovereignty over the islands of the South China Sea and adjacent OCS.
China’s continued push to control the entire South China Sea is straining relationships with all the neighboring governments, especially Japan. On Sept. 11, China sent surveillance ships to the disputed islands off Taiwan. Japan calls them the Senkaku Islands while China named these the Diaoyu Islands.
On Sept. 11, Japan’s government said it had agreed to purchase the islands from Japanese owners. The islands are southwest of Okinawa.
China responded by saying the islands have been sacred territory since ancient times, even though these are uninhabited.
China is adamant about not going into negotiations over maritime boundaries while the other countries would like to bring the disputes under international negotiations. China would rather use its clout by bargaining with individual nations. Planned drilling operations offshore Vietnam and the Philippines could bring the matter to a head.
The argument over which country owns what OCS also is prevalent in the Falklands Islands off Argentina. Argentina and the UK already have fought one war over the islands, which the UK won.
With the exploration success off the islands, Argentina’s government is ramping up its rhetoric about its ownership of the OCS and the oil and gas that the country needs.
While the smaller companies were performing exploration operations, Argentina was relatively quiet. However, with success came investment in the region from larger oil and gas companies.
At that point, the government sent warnings to all the companies involved that it would take actions against the companies that were investing in the potential development of the oil and gas reserves. The warnings did not slow down the investors.
The UK government told Argentina’s leaders that it would continue to back the Falkland Islands. The nationalization of YPF by the current Argentine government indicates just how much the need for domestic oil and gas is driving that government’s decisions. There remains a major political risk for companies operating in the area.
These two hot spots are indicative of what happens when oil and gas are discovered in areas under dispute. The eastern Mediterranean Sea is another region with major offshore confrontations.
How the countries deal with these conflicts could have an impact on oil and gas companies far beyond just those regions. If these become armed confrontations, oil prices would skyrocket.
Contact the author, Scott Weeden, at sweeden@hartenergy.com.
