News / Asia

Oil Companies Weigh S. China Sea Exploration Risks

Simone Orendain
MANILA — The disputed South China Sea is believed to hold huge reserves of hydrocarbon resources. Some estimates of potential oil reserves run as high as 213 billion barrels and natural gas at two quadrillion cubic feet - making it one of the world’s richest deposits.

Countries in the region are selling exploration contracts to oil companies interested in tapping into those potentially vast energy resources. Last week, the Philippines put two blocks in the sea up for auction. A day later, China announced it would sell nine blocks in an area Vietnam claims.

But, with China, the Philippines, Vietnam, Taiwan, Malaysia and Brunei involved in territorial disputes about who owns the rights to those hydrocarbon deposits, companies may be reluctant to bid.

Ian Storey, a senior fellow at the Institute of Southeast Asian Studies in Singapore, says with the escalation of tensions in the past year, certain oil companies that bid in the disputed parts of the South China Sea now face the risk of being harassed.

Click to enlargeClick to enlarge
x
Click to enlarge
Click to enlarge
“My guess is, given that the companies that have bid for these blocks are not the major energy producers, then it’s likely that China could pursue more coercive measures against them,” said Storey.

Philippines Energy Department Undersecretary Jay Layug says the blocks recently up for sale are well within Manila’s exclusive economic zone, defined as the ocean up to 370 kilometers from a country’s coast. But China also claims the area based on ancient maps.

Layug says two blocks are disputed by China. They are situated near the contested Reed Bank, where Philippines ships have had run-ins with Chinese vessels.

Since the last Reed Bank incident, the government has taken precautions, Layug says.

“What we have done at the Department of Energy is to make sure that all exploration activities of our service contractors are coordinated with the Philippine Coast Guard and the Department of Defense.”

Although Philippine authorities deemed 20 companies eligible to bid on the remaining three blocks up for auction on July 31, just one company placed a bid on one of the disputed blocks. The other block drew two bids.

Some analysts say the lack of bidding indicates hesitation about the territory’s disputed ownership, Layug rejects that view.

“Certainly, based on our records, we did not receive any hesitation or apprehension from any of those who expressed interest,” he said.

According to Layug, interest in this latest offering was higher than the combined number of bids in the past three calls for contractors.

Kang Wu, a senior advisor on the China market at FACTS Global Energy, which assesses the demand for oil globally, says current tension about the disputes in the South China Sea is a major deterrent to companies, but the hydrocarbons can still be attractive.

“You have so many small drillers which are risk-takers for all kinds of reasons," Wu said. "High risk also means high reward, potentially. So, in the end, it’s every company’s policy, their own sort of methodology of weighing the risk.”

Wu points out some of those risks come with high reward such as when oil companies operated in the oil-rich Persian Gulf that became a combat zone during the Iran-Iraq war of the 1980’s.

Storey says the complication with the South China Sea is that countries have dug in their heels with their claims. And he warns the current trend is “moving in the wrong direction,” meaning that the disputes already underway could worsen in the coming years.

You May Like

Lebanese Media Unite to Support Palestinians in Gaza

Joint newscast billed as Arab world’s first unified news bulletin in support of Hamas-controlled Gaza Strip More

Photogallery Australian PM Alleges ‘Coverup’ at MH17 Crash Site

Meanwhile, Russia's ambassador to Malaysia denies plane's black boxes were opened before they were handed over to Malaysian officials More

Despite Advances in AIDS Treatment, Stigma Lingers

Leading immunologist tells VOA that stigma is often what prevents those infected with disease from seeking treatment More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
IAEA: Iran Turns its Enriched Uranium Into Less Harmful Formi
X
July 22, 2014 10:26 AM
Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.
Video

Video Relic of Saint Draws Catholics Worried About Immigration Issue

A Roman Catholic saint who is a figure of devotion for those crossing the border into the United States is attracting believers concerned about the plight of undocumented immigrants. Mike O'Sullivan reports from Los Angeles, where a relic of Saint Toribio has drawn thousands to local churches.
Video

Video Ukraine Rebels Surrender MH17 Black Boxes

After days of negotiations, a senior separatist leader handed over two black boxes from an airliner downed over eastern Ukraine to Malaysian experts early Tuesday. While on Monday, the U.N. Security Council unanimously demanded that armed groups controlling the crash site allow safe and unrestricted access to the wreckage.
Video

Video In Cambodia, HIV Diagnosis Brings Deadly Shame

Although HIV/AIDS is now a treatable condition, a positive diagnosis is still a life altering experience. In Cambodia, people living with HIV are often disowned by friends, family and the community. This humiliation can be unbearable. We bring you one Cambodian woman’s struggle to overcome a life tragedy and her own HIV positive diagnosis.
Video

Video Nature of Space Exploration Enters New Age

Forty-five years ago this month, the first humans walked on the moon. It was during an era of the space race between the United States and the Soviet Union. World politics have changed since then and -- as Elizabeth Lee reports -- so has the nature of space exploration.
Video

Video Chicago’s Argonne Lab Developing Battery of the Future

In 2012, the U.S. Department of Energy’s Office of Science awarded a $120 million grant to a new technology center focused on battery development - headquartered at Argonne National Laboratory in suburban Chicago, Illinois. As VOA’s Kane Farabaugh reports, there scientists are making the next technological breakthroughs in energy storage.
Video

Video In NW Pakistan, Army Offensive Causes Massive Number of Displaced

Pakistan’s army offensive in North Waziristan has resulted in the large-scale displacement of the local population. VOA's Ayaz Gul reports from northwest Pakistan where authorities say around 80 percent of the estimated 1 million internally displaced persons [IDPs] have settled in Bannu district, while much of the remaining 20 percent are scattered in nearby cities.
Video

Video Kurdish Peshmerga Force Secures Kirkuk, Its Oil

The Kurdistan regional government has sent its Peshmerga troops into the adjacent province of Kirkuk to drive out insurgents, and to secure the area's rich oil fields. By doing this, the regional government has added a fourth province to the three it officially controls. The oil also provides revenue that could make an independent Kurdistan economically strong. VOA’s Jeffrey Young went out with the Peshmerga and filed this report.
Video

Video Malaysia Reeling: Second Air Disaster in Four Months

Malaysia is reeling from the second air disaster in four months involving the country’s flag carrier. Flight 340 vanished in March and despite an extensive search, no debris has been found. And on Thursday, Flight 17, likely hit by a surface-to-air missile, came apart over eastern Ukraine. The two incidents together have left more than 500 people dead. VOA Correspondent Steve Herman reports from Kuala Lumpur.

AppleAndroid