Energy Politics in the South China Sea

November 16, 2016

Territorial claims in the South China Sea are typically viewed through a nationalist or military lens. However, these labels may obscure the true aim of nations seeking sovereignty over the region’s seas, as one of the world’s largest offshore oil fields lies under the waters separating several Southeast Asian countries.[1] Exact estimates vary and so far, no nation has properly explored the disputed waters. But this soon may change.

 

This spring, the Filipino people elected Rodrigo Duterte in yet another wave of populism that we continue to witness around the world.[2] Instead of opposing Chinese claims over the South China Sea like his predecessor, Benigno Aquino III, Duterte has moved to align his country more closely with China in an attempt to gain access to the oil reserves his country needs.[3]

 

Five nations in the region have territorial claims that overlap with China’s “nine-dash” line, a line that Beijing has used to justify military exercises and the construction of artificial islands.[4] In 2013, the Philippines brought an unprecedented legal challenge in front of the tribunal at the Permanent Court of Arbitration in The Hague, asserting that China had infringed upon its territory.[5] Manila’s claims centered on Chinese obstruction of the Reed Bank, a large tablemount thought to be rich in oil and gas deposits.[6]

 

This year the tribunal overwhelmingly rejected Chinese claims based on historical rights, opening the door for valid territorial claims from other governments such as Indonesia and Vietnam.[7] China immediately stated that the tribunal had no jurisdiction and has refused to comply with the ruling.[8] Only international pressure from a source such as the United States would likely force China to back off, but it appears as though the very nation that brought the case will not wait for any future developments along those lines. Such a move is not surprising given the current political situation in the Philippines. The case against Chinese claims to the South China Sea were brought under former President Aquino III. The election of Duterte has altered the foreign policy outlook of the island nation, with Duterte making hardline comments against the United States and openly seeking to increase his nation’s trade with China.[9]

 

More important than politics is the Philippines’ increasing need for energy. The nation relies overwhelmingly on imports to fuel its rapidly growing economy.[10] Its main oil field, Malampaya, began operations in 2001 but is only predicted to last another 10 years.[11] The sense of urgency felt in Manila likely played a role in Duterte’s decision to cooperate with China instead of waiting for help in resolving the dispute over the territory.

 

In October of this year, Duterte traveled to China and signed $13 billion in trade deals.[12] While neither side has formally announced a deal regarding oil and gas exploration, the Philippine newspaper “Inquirer” reported that the issue was discussed and that both sides appear ready to move forward.[13]

 

A potential joint exploration agreement between China and The Philippines would set the stage for oil companies to begin exploring what might be the largest offshore oil field in the world. The U.S. Energy Information Administration believes that there could be as much as 11 billion barrels of oil and 190 trillion cubic feet of natural gas under the South China Sea.[14] Chinese estimates put the number much higher, although independent sources have yet to verify Chinese claims.[15]

 

China will likely need the help of foreign firms with specialized technology in order to develop the oil and gas reserves in the South China Sea. But companies will likely still be wary of involving themselves in the politics of the South China Sea. In May 2014, state-owned China National Offshore Oil Corporation (CNOOC) moved a rig into a potential drilling position in Vietnam’s Exclusive Economic Zone, sparking protests from Hanoi.[16] Vietnamese ships were sent to disrupt the operations.[17] Such an example displays the difficulty of drilling for resources in contested waters, and the ongoing spat over territory has prevented companies from exploring for deposits in order to start the process.

 

The Philippines potential exploration deal with China could also serve as a way to dodge questions about sovereignty and territory while still extracting resources.[18] To the United States, such a decision serves to undermine its foreign policy goal of curbing Chinese influence in the region. If more nations decide to cooperate with China in response to its aggressive tactics, Washington will find itself in a tricky position moving forward.

 

The need for energy has shaped the politics of countries in the Middle East and Eurasia in the past, but it appears that Southeast Asia could become the new frontier for diplomatic wrangling over fossil fuels. How this affects the United States’ influence in the region remains to be seen, but at least one nation has shown a willingness to acquiesce to Chinese tactics in order to tackle a potential energy crisis.

 


 

[1] Brian Spegele, South China Sea Tensions Leave Oil Potential Untapped, wall street journal, (Jul. 12, 2016), http://www.wsj.com/articles/south-china-sea-tensions-leave-oil-potential-untapped-1468387010.
[2] Tom Smith, President Duterte’s Anti-US Populism in a Dangerously Isolationist Path, the guardian, (Sept. 7, 2016, 10:05 AM), https://www.theguardian.com/commentisfree/2016/sep/07/duterte-anti-us-philippines-isolationist-foreign-policy-insult-barack-obama-china.

[3] Id.

[4] Clay Dillow, US on Edge Over New Powder Keg in South China Sea, cnbc, (Oct. 21, 2016, 7:00 AM), http://www.cnbc.com/2016/10/21/china-and-the-philippines-could-ink-oil-exploration-deal-in-south-china-sea.html.

[5] The Republic of the Philippines v. The People’s Republic of China, PCA 2013-19 (Jul. 12, 2016) (Mensah, Cot, Pawlak, Soons & Wolfrum, Arbs.).

[6] Enrico Dela Cruz, Philippines’ Oil Still in Troubled Waters After South China Sea Ruling, reuters, (Jul. 22, 2016, 3:40 AM), http://www.reuters.com/article/us-southchinasea-ruling-philippines-ener-idUSKCN1020HK.

[7] Id.

[8] Brian Spegele, South China Sea Tensions Leave Oil Potential Untapped, wall street journal, (Jul. 12, 2016), http://www.wsj.com/articles/south-china-sea-tensions-leave-oil-potential-untapped-1468387010.

[9] indian express, http://indianexpress.com/article/world/world-news/south-china-sea-dispute-china-philippine-to-sign-13-5-bn-in-deals-hold-sea-bilaterals-3093338/ (last visited Oct. 23, 2016).

[10] Enrico Dela Cruz, Philippines’ Oil Still in Troubled Waters After South China Sea Ruling, reuters, (Jul. 22, 2016, 3:40 AM), http://www.reuters.com/article/us-southchinasea-ruling-philippines-ener-idUSKCN1020HK.

[11] Id.

[12] Max Boot, The Contest to Control the South China Sea Just Got a Lot More Complicated, business insider, (Oct. 23, 2016, 10:19 AM), http://www.businessinsider.com/philippine-president-duterte-complicates-south-china-sea-power-struggle-2016-10.

[13] Daxim Lucas, PH to Agree on Joint Oil Exploration with China in Disputed Sea, philippine daily inquirer, (Oct. 19, 2016, 5:12 AM), http://business.inquirer.net/216959/ph-to-agree-on-joint-oil-exploration-with-china-in-disputed-sea.

[14] Brian Spegele, South China Sea Tensions Leave Oil Potential Untapped, wall street journal, (Jul. 12, 2016), http://www.wsj.com/articles/south-china-sea-tensions-leave-oil-potential-untapped-1468387010.

[15] Id.

[16] Enrico Dela Cruz, Philippines’ Oil Still in Troubled Waters After South China Sea Ruling, reuters, (Jul. 22, 2016, 3:40 AM), http://www.reuters.com/article/us-southchinasea-ruling-philippines-ener-idUSKCN1020HK.

[17] Id.

[18] Clay Dillow, US on Edge Over New Powder Keg in South China Sea, cnbc, (Oct. 21, 2016, 7:00 AM), http://www.cnbc.com/2016/10/21/china-and-the-philippines-could-ink-oil-exploration-deal-in-south-china-sea.html.

About

Greg Roper is a third year student at The University of Texas School of Law. He graduated magna cum laude in 2012 from George Mason University with a B.A. in Global Affairs. He will be practicing real estate law in the Ft. Worth office of Kelly Hart & Hallman after graduation.