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The Status of Sovereignty, Mining and

Extraction Rights of the Rim Nations of

the South China Sea

Bangkok, 28 February 2013

Dr. Hooman Peimani

Principal Fellow & Head

Energy Security Division

Energy Studies Institute Contributed by: Sahara Piang Brahim (ESI Research Associate)

I. The South China Sea (SCS): Importance

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Source: BBC News Asia, South China Sea Dispute, Retrieved 21 February 2013, http://www.bbc.co.uk/news/world-asia-pacific-13748349

I. The South China Sea (SCS): Importance

A. Resources

1 – Fossil energy: oil & gas to be discussed

2 – Minerals: e.g., manganese, iron, copper, and

cobalt, and rare formations such as manganese

nodules. Estimates on their reserves are unavailable.

B. Strategic

1 – Sea routes connecting the Asia-Pacific

region/Americas to the Middle East and Europe

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II. Sovereignty disputes over the ownership of

certain islands and their territorial waters

A. Major contenders: China, Taiwan and

certain ASEAN countries (Brunei, Indonesia,

Malaysia, the Philippines and Vietnam)

B. Ownership disputes within ASEAN and

between certain ASEAN countries and

China: Multiple ownership claims

C. What is at stake: territories, sovereignty,

strategic military/security considerations,

national prestige and untapped energy

Source: http://www.southchinasea.org/2011/08/19/south-china-sea-reference-map-cia-small

/

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III. Energy resources of the South China

Sea: The main source of interest/conflict

A. Mainly offshore oil and gas reserves

with unknown volume of oil and gas

B. Absence of scientifically-proven data on

these reserves

C. Estimates in absence of such data:

e.g., approximately 11 billion barrels of oil

and 5.38 trillion cubic meters of natural gas

in proved and probable reserves

D. It is unknown whether these resources

are commercially viable.

E. In absence of scientific data, they

may well be only short-term or

low-yielding resources.

Source: http://www.japanfocus.org/-ian-storey/2734

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IV. Ongoing disputes: major players

A. Not all the seven rim countries are actively involved

in the disputes.

B. Major players in the ongoing disputes: China,

Vietnam and the Philippines

C. Low-intensity naval confrontations between China

and Vietnam and China and the Philippines in 2011

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V. Significance of the energy resources for the

major contenders

A. For China

1-Compared to the Philippines and Vietnam, China

is very rich in oil (14.7 bb), gas (3.1 tcm) and coal (114.5 bt),

but needs large imports of oil (p:4.09; c: 9.758) and gas

(p:102.5 bcm; c: 130.7 bcm).

2- Establishing its ownership over the disputed parts of

the SCS the extent of its oil and gas reserves are yet to be

determined will be important but not vital for China.

3- As a rich emerging superpower, China can also afford

large imports of oil and gas unlike the Philippines and

Vietnam.

Sources: http://www.bp.com/sectiongenericarticle800.do?categoryId=9037130&contentId=7068669

http://www.chinaforgroups.com/chinamap.html

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V. Significance of the resources for the

major contenders

B. For Vietnam

Vietnam has small oil (4.4 bb), gas (0.6 tcm) and coal

(150 mt) reserves. Its oil production is declining (fluctuating

around its domestic needs (p: 328,000 bpd; c: 358,000). It has

small gas production consumed domestically (8,5 bcm in 2011).

Its coal production (24.9 mtoe) exceeds its consumption (15 mtoe)

enabling it to export coal.

C. For the Philippines The Philippines is not self-sufficient in oil (c:256,000 bpd),

gas (c: 3.6 bcm) and coal (c:8.3 mtoe) and thus heavily relies on

Fossil energy imports.

The SCS oil and gas reserves could significantly

increase their reserves to help them meet their

growing energy demand or potentially create an

export capacity for them.

Sources: http://www.lonelyplanet.com/maps/asia/philippines/

http://www.lonelyplanet.com/maps/asia/vietnam/

http://www.bp.com/sectiongenericarticle800.do?categoryId=9037130&contentId=7068669

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V. Significance of the resources for the

major contenders

Production/Consumption of Energy in China in 2009

(Thousand tonnes of oil equivalent)

Source: OECD/IEA, 2009 Energy Balance for China, People’s Republic of, Retrieved 21 February 2013, from http://www.iea.org/stats/balancetable.asp?COUNTRY_CODE=CN

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Supply and Consumption Coal &

peat

Crude oil Oil products Natural

Gas

Nuclear Hydro Geotherm.

solar etc.

Biofuels &

waste

Electricity Heat Total

Production 1537825 189619 - 71338 18277 52945 11316 203620 - - 2084940

Imports 69300 203653 47798 6387 - - - - 517 - 327655

Exports -15249 -5073 -28236 -2685 - - - - -1495 - -52739

Intl. marine bunkers - - -9641 - - - - - - - -9641

Intl. aviation bunkers - - -2711 - - - - - - - -2711

Stock changes -74308 -6765 -9331 - - - - - - - -90403

TPES 1517568 381434 -2121 75040 18277 52945 11316 203620 -979 - 2257101

Electricity and CHP plants -736735 -44 -4037 -11231 -18277 -52945 -2473 -808 317850 - -508701

Oil refineries - -371094 361650 - - - - - - - -9444

Other transformation - - - - - - - - - - -

TFC 8922 - 15177 625 - - - 24292 6616 - 55646

V. Significance of the resources for the

major contenders

Production/Consumption of Energy in Vietnam in 2009

(Thousand tonnes of oil equivalent)

Source: OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.284.

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Supply and Consumption Coal & peat

Crude oil Oil products Natural Gas

Nuclear Hydro Geotherm. solar etc.

Biofuels & waste

Electricity Heat Total

Production 24480 17330 - - - 2578 - 25155 - - 76642

Imports 465 - 14805 7093 - - - - 353 - 15623

Exports -13995 -13614 -1811 - - - - - -32 - -29453

Intl. marine bunkers - - -287 - - - - - - - -287

Intl. aviation bunkers - - -387 - - - - - - - -387

Stock changes 1652 -1008 1266 - - - - - - - 1910

TPES 12602 2708 13585 7093 - 2578 - 25155 321 - 64048

Electricity and CHP plants -3680 - -647 -6468 - -2578 - - 7154 - -6211

Oil refineries - -1486 1514 - - - - - - - 28

Other transformation - -1222 725 - - - - -863 -859 - -2219

TFC 8922 - 15177 625 - - - 24292 6616 - 55646

V. Significance of the resources for the

major contenders

Production/Consumption of Energy in the Philippines in 2009

(Thousand tonnes of oil equivalent)

Source: OECD/IEA, Energy Balances of Non-OECD Countries (Paris: International Energy Agency, 2011), p. II.227.

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Supply and Consumption

Coal & peat

Crude oil

Oil products

Natural Gas

Nuclear Hydro Geotherm. solar etc.

Biofuels & waste

Electricity Heat Total

Production 2474 1143 - 3213 - 842 8881 6922 - - 23474

Imports 4496 6909 7440 - - - - 33 - - 18877

Exports -1052 -1004 -484 - - - - - - - -2541

Intl. marine bunkers - - -194 - - - - - - - -194

Intl. aviation bunkers - - -1044 - - - - - - - -1044

Stock changes - 432 -169 - - - - 8 - - 271

TPES 5918 7479 5547 3213 - 842 8881 6963 - - 38842

Transfers - - - - - - - - - - -

Statistical Differences 672 -353 -33 -1211 - - - -6 - - 280

Electricity plants -4890 - -1165 -13294 - -842 -8881 - 5325 - -13417

CHP plants - - - - - - - - - - -

Heat plants - - - - - - - - - - -

Blast furnaces -42 - - - - - - - - - -42

Gas works - - - - - - - - - - -

Coke/pat.fuel/BKB

plants - - - - - - - - - - -

Oil refineries - -7126 7024 - - - - - - - -102

Petrochemical plants - - - - - - - - - - -

Liquefaction plants - - - -892 - - - - - - -

Other transformation - - - - - - - -1325 - - -1325

Energy industry own use

- - - -6743 - - - - -303 - -480

Losses - - - -749 - - - - -645 - -645

TFC 1658 - 11375 6120 - - - 5631 4377 - 23111

VI. The main energy reason for China’s interest

in the disputed parts of the SCS

A. Strategic thinking and not immediate or short-term needs

B. China’s naval weaknesses

1-Lacking naval supremacy

2-Unable to achieve it in the foreseeable future (30-50 years)

China’s first aircraft carrier Liaoning

Source: http://english.peopledaily.com.cn/90786/7960292.html

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VI. The main reason for China’s interest in the

disputed parts of the SCS

C. Beijing is concerned about its long-term secured

access to its supplying regions through the sea

routes dominated by the unrivalled American

navy.

The USA could well block those routes in

case of deterioration of Washington’s ties with

Beijing or the latter’s escalating conflicts with

an American ally, particularly, Taiwan. 1

D. Potentially, China’s sea-based oil and gas (LNG)

imports are not reliable.

USS George Washington off southern coast of Vietnam in South China

Sea on 20 October 2012. PHOTO: AP

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Sources: http://www.straitstimes.com/breaking-news/asia/story/us-aircraft-carrier-cruises-through-disputed-south-china-sea-20121020

http://www.google.com.sg/search?q=map+of+asia&hl=en&prmd=imvns&tbm=isch&tbo=u&source=univ&sa=X&ei=j66IUNqmHPGuiQe_m4GoBg&sqi=2&ved=0CDIQsAQ&biw=1280&bih=866

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VII. China’s concerns about the unavailability

of sea-based supplies of fossil energy

A. Measures to address these concerns:

1- China needs to increase the

availability of energy (oil and gas)

resources within its territories.

2- China needs to increase its oil and

gas imports through land routes

uncontrolled by the USA.

•Increasing importance of piped oil

and gas, e.g., the Central Asian Gas

Pipeline

Source: http://worldpress.org/specials/pp/pipelines.htm

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VIII. Current situation

A. The ownership disputes are not yet resolved and no meaningful step has

been made in this regard by China, Vietnam and the Philippines.

B. Reason: incompatibility of the conflicting ownership claims leaving no room

for compromise under the different circumstances.

C. ASEAN has opted not to get involved in the disputes by supporting the

claims of the Philippines and Vietnam referring to them as bilateral issues of

the involved countries as evident in its summit meetings in April and

November 2012.

D. In absence of any regional support, Vietnam and the Philippines are

becoming closer to the USA seeking to expand its political and military

influence and presence in the Asia-Pacific region, including Southeast Asia.

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IX. Conclusions: Major trends

A. The possibility of a peaceful settlement of the disputes and thus

acceptance of a legal regime for the division of the SCS and its disputed

land/water territories is very unlikely in the foreseeable future.

B. The status of sovereignty, mining and extraction rights of the rim nations of

the South China Sea will remain ambiguous and unsettled in the

mentioned timeframe.

C. Major efforts to develop the oil/gas reserves in the disputed parts of the

SCS will be unlikely due to the uncertainty about the ownership rights to

discourage major energy companies from extensive involvements in such

projects.

D. The escalation of the current disputes to a full-scale military conflict pitting

China against Vietnam and the Philippines, while possible, will be unlikely

due to a lack of interest in such conflict by the three states and the USA.

E. Limited development projects and low-intensity naval and aerial

confrontations will be likely in the foreseeable future.

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Thank you for paying attention!

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