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

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Srebrenica Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs countermeasure at UN More

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants 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.
Family of American Marine Calls for Release From Iranian Prisoni
X
Heather Murdock
July 01, 2015 8:59 PM
As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video Nubians in Kenya Face Land Challenges

East Africa's ethnic Nubians have a rich cultural history that dates back thousands of years, but in Kenya they are facing hardships, including the loss of lands they have lived on for generations. They say the government has reneged on its pledge to award them title deeds for the plots. VOA's Lenny Ruvaga reports.
Video

Video Military Experts Question New Russian Tank Capabilities

Russia has been showing off its new tank design – the Armata T-14. Designers claim it is 20 years ahead of current Western designs - and driving it feels like playing a computer game. But military analysts question those assertions, and warn the cost could be too heavy a burden for Russia’s struggling economy. Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs