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

Turbulent Transition Imperils Tunisia’s Arab Spring Gains

Critics say new anti-terrorism laws worsen Tunisia's situation while others put faith in country’s vibrant civil organizations, women’s movement More

Burundi’s Political Crisis May Become Humanitarian One

United Nations aid agencies issue warning as deadly violence sends tens of thousands fleeing More

Yemenis Adjust to Life Under Houthi Rule

Locals want warring parties to strike deal to stop bloodletting before deciding how country is governed 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.
Seoul Sponsors Korean Unification Fairi
X
Brian Padden
May 29, 2015 1:27 PM
With inter-Korean relations deteriorating over the North’s nuclear program, past military provocations and human rights abuses, many Koreans still hold out hope for eventual peaceful re-unification. VOA’s Brian Padden visited a “unification fair” held this week in Seoul, where border communities promoted the benefits of increased cooperation.
Video

Video Seoul Sponsors Korean Unification Fair

With inter-Korean relations deteriorating over the North’s nuclear program, past military provocations and human rights abuses, many Koreans still hold out hope for eventual peaceful re-unification. VOA’s Brian Padden visited a “unification fair” held this week in Seoul, where border communities promoted the benefits of increased cooperation.
Video

Video Purple Door Coffeeshop: Changing Lives One Cup at a Time

For a quarter of his life, Kevin Persons lived on the street. Today, he is working behind the counter of an espresso bar, serving coffee and working to transition off the streets and into a home. Paul Vargas reports for VOA.
Video

Video Modular Robot Getting Closer to Reality

A robot being developed at Carnegie Mellon University has evolved into a multi-legged modular mechanical snake, able to move over rugged surfaces and explore the surroundings. Scientists say such machines could someday help in search and rescue operations. VOA’s George Putic reports.
Video

Video Shanghai Hosts Big Consumer Electronics Show

Electronic gadgets are a huge success in China, judging by the first Asian Consumer Electronics Show, held this week in Shanghai. Over the course of two days, more than 20,000 visitors watched, tested and played with useful and some less-useful electronic devices exhibited by about 200 manufacturers. VOA’s George Putic has more.
Video

Video Forced to Return Home, Afghan Refugees Face Increased Hardship

Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Britain Makes Controversial Move to Crack Down on Extremism

Britain is moving to tighten controls on extremist rhetoric, even when it does not incite violence or hatred -- a move that some are concerned might unduly restrict basic freedoms. It is an issue many countries are grappling with as extremist groups gain power in the Middle East, fueled in part by donations and fighters from the West. VOA’s Al Pessin reports from London.
Video

Video 3D Printer Makes Replica of Iconic Sports Car

Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video Al-Shabab Recruitment Drive Still on In Kenya

The al-Shabab militants that have long battled for control of Somalia also have recruited thousands of young people in Kenya, leaving many families disconsolate. Mohammed Yusuf recently visited the Kenyan town of Isiolo, and met with relatives of those recruited, as well as a many who have helped with the recruiting.
Video

Video A Small Oasis on Kabul's Outskirts Provides Relief From Security Tensions

When people in Kabul want to get away from the city and relax, many choose Qargha Lake, a small resort on the outskirts of Kabul. Ayesha Tanzeem visited and talked with people about the precious oasis.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.

VOA Blogs