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The Honolulu Advertiser
Posted on: Sunday, June 24, 2007

COMMENTARY
What lies beneath

By Michael Richardson

Hawaii news photo - The Honolulu Advertiser

South China Sea’s rich waters brewing as China and its southern neighbors intensify competing searches for energy offshore.

ADVERTISER LIBRARY PHOTO | 2000

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In the 1990s, the South China Sea was a cockpit of contending territorial claims involving China and its Southeast Asian neighbors. Today, thanks to a measure of mutual restraint, the region regarded by the United States and its military forces as a vital strategic link between the Pacific and Indian oceans is relatively calm. But many of the conflicting claims over islands and their surrounding waters and seabed in the South China Sea remain unresolved.

What could upset the current equilibrium? The biggest risk is that rapidly rising demand for energy in Asia will again put China and Southeast Asian countries in contention. This demand and the high price for oil and natural gas are driving Asian nations to intensify their search for energy offshore. At the same time, advances in technology, skills and equipment are enabling them to explore and exploit what they find farther and farther from land in ever-deeper waters.

They are also seeking new sources of energy. China announced recently that it had for the first time managed to tap into seabed sediment containing gas hydrates in the northern part of the South China Sea. Zhang Hongtao, deputy director-general of the China Geological Survey, a government agency, said that by collecting the gas hydrate samples last month, China had become the fourth country after the United States, Japan and India to achieve this technological breakthrough.

Some scientists have said that the huge quantities of methane-rich hydrates kept stable by low temperature and high pressure on the seafloor or below the Arctic could become an important fuel for the future. Methane is the main component of natural gas. Every cubic meter of gas hydrate, which is a solid crystalline structure in its natural state, releases as much as 160 cubic meters of gas.

Zhang was quoted as saying that initial estimates indicated that the potential volume of gas hydrates on the continential shelf in the area tapped by China last month was equivalent to more than 100 million metric tons of oil — about one-third of China's annual oil consumption. However, he added that because it was difficult to produce a continuous gas flow from hydrates, China might not be in position to develop the resource for many more years.

Meanwhile, China and the Southeast Asian states bordering the South China Sea are going further offshore in their search for more oil and conventional gas deposits. In June 2006, China's top offshore oil and gas producer, state-owned CNOOC Ltd, and Canada's Husky Energy announced that they had found a giant gas field in the northern sector of the South China Sea. Husky, controlled by Hong Kong tycoon Li Ka-shing, said the field could contain up to 6 trillion cubic feet of recoverable resources, adding around 7 percent to China's total gas reserves.

Significantly, it was China's first deep-water petroleum discovery. The exploration well was drilled 155 miles south of Hong Kong at a depth of 4,920 feet. Husky plans to drill more wells to delineate its gas reservoir, starting later this year.

China, the world's second-largest energy consumer after the U.S., wants to increase its gas consumption to reduce heavy reliance on coal, which causes serious air pollution. Southeast Asian countries are also turning to clean-burning gas in a big way to generate electricity and for industrial and home use. Natural gas use among Asian countries is forecast to rise by about 4.5 percent annually on average until 2025 — faster than any other fuel — with almost half of the increase coming from China. If this growth rate is maintained, Asian demand will exceed 21 trillion cubic feet, nearly triple current consumption, by 2025.

The South China Sea, which covers an area of more than one million square miles, is considered to have greater gas than oil potential. Most of the hydrocarbon fields explored in the South China Sea areas of Brunei, Indonesia, Malaysia, the Philippines, Thailand and Vietnam, as well as China, contain gas, not oil. Estimates by the U.S. Geological Survey indicate that between 60 percent and 70 percent of the region's hydrocarbon resources are gas. Even so, the South China Sea has proven reserves of around seven billion barrels of oil and a production rate of about 2.5 million barrels per day.

From being a net exporter of oil in 1993, China today relies on foreign supplies for about half the oil it uses. It is also becoming a major gas importer. For reasons of energy security, China has placed a high priority on getting as much of its future oil and gas as possible from within its land territory, from offshore zones, or as close to home as possible, including Russia and Central Asia. It is expanding its offshore energy search.

PetroChina, an arm of China's biggest oil producer, announced in March 2006 that it would be turning its attention to the southern sector of the South China Sea in the next few years. This is the politically sensitive zone where most of the overlapping maritime boundary claims lie. "We are now doing the preliminary work to develop fields in the southern part of the South China Sea area, and major breakthroughs will be expected during the following five years," Hu Wenrui, PetroChina's vice president, told an oil and gas summit in Beijing. He declined to elaborate.

But as Southeast Asian governments and the energy companies working for them push deeper into the South China Sea in their hunt for more gas and oil, they can only hope that China's southward push will lead to better cooperation, not confrontation.

Michael Richardson, a former Asia editor of the International Herald Tribune, is an energy and security specialist at the Institute of South East Asian Studies in Singapore. He wrote this commentary for The Advertiser.