Water Wars: Jockeying for Black Gold in the South China Sea - China Leverages Its Growing Military Presence, Threatening Vietnam and Building Ties with the Philippines

Jul 31, 2017 | Jimmy Chalk and Sarah Grant
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This week China made waves in the South China Sea’s hydrocarbon space, hinting at joint venture opportunities with the Philippines and coercing Vietnam into shutting off the flow of natural gas within its own exclusive economic zone (EEZ). Oil and gas play a significant role in the South China Sea dispute. United States Geological Survey studies estimate that beneath the South China Sea lay 22 million barrels of crude oil and 300 million trillion cubic feet of natural gas, which rival estimates of reserves in Mexico and the U.S. Gulf Coast. Yet the Sea’s hydrocarbons remain largely untapped. That’s due in part to the difficulties of exploring a region burdened by unpredictable weather, fragmented geology, and little infrastructure, and in part to the territorial disputes that discourage risk-averse producers from investing in the region. Those territorial disputes bubbled to the fore this week. On Monday, Bill Hayton reported that China threatened to attack Vietnamese regional outposts unless Vietnam shut down drilling operations at Block 136-03, near the southeastern edge of Vietnam’s EEZ. Spanish oil firm Repsol, exploring in partnership with Vietnam’s state-owned oil company PetroVietnam, complied. Questioned on Tuesday, China’s Foreign Ministry was characteristically cryptic: “China urges the relevant party to cease the relevant unilateral infringing activities and with practical actions safeguard the hard-earned positive situation in the South China Sea.”