Pouring oil on troubled waters?

China to employ 1st deep-sea rig in South China Sea

China will formally employ its first home-made, deep-sea semi-submersible drilling platform in the east part of South China Sea on May 9, marking the beginning of the country's deepwater oil strategy, the National Energy Administration said.

State-run China National Offshore Oil Corp (CNOOC) is the owner and operator of the deep-sea rig.

Oil's not well on South China Sea

China has once again warned companies looking to explore for hydrocarbons in the South China Sea (SCS) to stay away from the disputed waters.

The South China Sea is believed to hold large reserves of undiscovered oil and gas.
Despite the United Nations Convention on the Law of the Sea (UNCLOS, 1982) guidelines, ownership disputes continue to stir up the SCS waters.

Among the nations flanking its shores, China, Vietnam and the Philippines are aggressively claiming sizeable portions of the sea. China has been demanding almost the entire area and is rooting for bilateral talks to resolve the territorial disputes, arguably to use its size to influence the one-to-one dialogues.

Recently, Beijing raised objections to ONGC's presence in SCS. ONGC's overseas arm, ONGC Videsh (OVL) holds stakes in a producing gas field — Block 06.1 in the Nam Con Son basin off Vietnam's south coast — in a joint venture with TNK-BP and state explorer PetroVietnam.

In 2006, OVL won a contract to jointly explore, along with PetroVietnam, Blocks 127 and 128 in the Phu Khanh basin, Vietnam. It then signed a three-year deal with Petrovietnam in September 2011 to jointly explore for oil and gas in these blocks. OVL later relinquished Block 127 after it encountered dry wells.

The blocks in question — 127 and 128 — lie within the Vietnamese maritime border as per the UNCLOS guidelines and partially beyond the line of control claimed by China.

However, China's claims are based on historical maps that find little support in international law.

Despite China's repeated warnings to nations for cessation of exploration in South China Sea, India has maintained its stand of respecting the freedom of international navigation through this key shipping route. The region can be an important piece on the energy supply map for both India and China. It opens up the shipping route for bringing ONGC's Sakhalin oil to India's coast through the Strait of Malacca.

Vietnam, Indonesia and the Philippines are pushing for increasing exploratory drilling in their respective Exclusive Economic Zones (EEZs) and Indian companies, like other international players, should grab this opportunity with both hands.

First, this will add a hydrocarbon supply source that is closer to its own shores, cutting down on the transportation distance; second, India's relationship with the Association of South-East Asian Nations (ASEAN) will gain ground, apart from the ‘customary' regional cooperation status.

To protect its interest in the South China Sea and in ASEAN, India needs to be both forceful and diplomatic. As of now, New Delhi's reply to Chinese bickering has been that India has faith in Vietnam's sovereign claims over the concerned blocks and ONGC's investment is purely commercial in nature, with no political connotation. As per the UNCLOS boundaries, India stands justified.

New Delhi, with due regard to its own stand on Kashmir, should not put its foot in its mouth by giving opinions on territorial debates. It also has to deal with the tempestuous task of settling its own border dispute with Beijing. Hence, concerted efforts to increase bilateral energy cooperation with Vietnam, the Philippines and other ASEAN countries may prove to be a diplomatic masterstroke, as it will check China's high-handedness in the region and establish India's commercial interest without political spite.

India, like China, is on the cusp of a demographic and economic makeover, and in need of increasing energy supplies to fuel economic development. Both the countries are keen on securing energy supplies from across the globe, with energy import bills damaging their balance of trade. The South China Sea is one such region that holds promise.

It will be foolhardy to let the opportunity pass, while global majors flock to exploit the region despite the sovereignty disputes.
The presence of energy majors such as ExxonMobil and BP in the SCS substantiates the promise that the region holds. Hence, it is in the best interest of both countries and the other littoral states to let the region be explored and its potential be assessed through material developments.