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China oil exploration offer geopolitically motivated

Latest China invitation overlaps Vietnamese East Sea territory

  A CNOOC oil platform is pictured at sunset on the East China Sea in this undated photo. Photo: Bloomberg

China's most recent invitation to foreign companies to bid for oil and gas exploration in several blocks in the East Sea, also known as South China Sea, is yet another geopolitical move as major companies are not likely to be attracted to disputed waters, analysts say.

"I think the majors will continue to tread carefully around disputed waters," said Euan Graham, a fellow at the S. Rajaratnam School of International Studies in Singapore.

He told Vietweek that there was a "negative" objective for the China National Offshore Oil Corporation (CNOOC) in putting out this bid to ward off Vietnam's existing partners and new entrants from making new investments within the infamous 9-dash line. China uses the line to claim a sea area that covers most of the East Sea which is believed to be rich in oil and natural resources and also part of important shipping lines.

On August 28, CNOOC invited foreign companies to bid for its "second batch of 26 blocks covering an area of 73,754 square kilometers, including one in Bohai Bay, three in East China Sea and 22 others in South China Sea."

The tender came two months after CNOOC's call for bids for nine blocks in the sea which were located well inside Vietnam's Exclusive Economic Zone and not in a disputed area, a move Vietnam denounced as illegal.

On August 31, Vietnam stated its opposition to CNOOC's latest move as the block 65/12 is located some three nautical miles from Vietnam's Cay Island in the Hoang Sa (Paracel) Archipelago.

Luong Thanh Nghi, spokesman for the Ministry of Foreign Affairs, said the move "seriously violates Vietnam's sovereignty over Hoang Sa Islands and is contrary to common understandings between the two countries' senior leaders and to the Declaration on the Conduct of Parties [in the South China Sea] signed between China and ASEAN countries in 2002."

It is "an illegal move and is invalid," he emphasized, adding that Vietnam opposes China's action and has requested it to rescind the invitation.

Graham said the total area under offer by CNOOC is substantial. "Added to the 9 blocks offered at the end of June, this is a significant statement of the company's intentions - and by extension, China's jurisdictional claims.


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"I see this as part of a concerted attempt to move forward on unilateral commercial exploitation of the South China Sea, fisheries included"¦ Energy is increasingly a short-term driver in the South China Sea that is making it harder for the disputants to move forward constructively," he said.

The move is a reminder to all concerned that China actively considers it has exclusive jurisdictional claim over the resources within these blocks, and that it is prepared to develop them unilaterally if necessary, he said.

Huang Xinhua, a geologist at energy consultancy firm IHS, said the second bid has less geopolitical symbolic value than the one in June and such efforts may not lead outsiders into believing that there is no dispute in these areas any more.

"I think everyone knows there is a serious water dispute issue around this relevant area," he told Vietweek.

Asked whether any foreign company will show interest in the new offer, Xinhua said: "I'm not sure how block 65/12 will be handled, but 65/24 block offered last year has not been taken by any company."

However, Carl Thayer, a Vietnam expert at the University of New South Wales in Australia, said the response depends on how much risk a foreign company thinks it will take.

He said some opportunistic foreign companies may bid with the idea that they can rely on Chinese protection or to "curry favor" with China.

He said such a bid can be viewed as a way of pleasing Beijing "that can be leveraged for some commercial advantage." Any foreign company that took up China's bid would reinforce China's sovereignty claims, he added.

China's invitation for bidding in the disputed sea came before a rare visit to India by China's defense minister Liang Guanglie, but analysts said it would not affect India's Look East policy.

Mohan Malik, an Asian security expert at the Asia-Pacific Center for Security Studies, said India's presence in the region would be a counterweight to China.

In July, Indian company ONGC Videsh Ltd (OVL) has said it would continue exploration activities in Vietnam's hydrocarbon block No. 128 for another two years, Indian newspaper Mint reported.

Block No. 128 is among the nine for which China had called for bids in June.

Malik said India's determination to strengthen its strategic partnership with Vietnam, commitment to pursue joint oil exploration with Hanoi in the East Sea waters in the face of Chinese opposition, strong support for a peaceful resolution of territorial disputes, and an emphasis on the freedom of navigation are signs of India maneuvering to be seen as a counterweight to Chinese power in East Asia.

India is also reportedly keen to sell the nonnuclear BrahMos supersonic cruise missiles and other military hardware at "friendship prices" to Vietnam, he said.

"An Indian naval presence in the South China Sea and the Pacific Ocean would counter Chinese naval presence in the Indian Ocean," he added.

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