Tuesday, October 28, 2014

• Beijing Zeroes In on Energy Potential of South China Sea By CHRIS HORTON


A Chinese Coast Guard vessel near a drilling rig that China installed in disputed waters in May.

HONG KONG — For the past several years, China has been throwing its weight around the South China Sea, a body of water studded with coral reefs that laps at the shores of not only China but also Vietnam, Malaysia, the Philippines and Brunei.




China has sent ships to stake claims across the area, notably when a flotilla that included the country’s most advanced amphibious assault vessel arrived at James Shoal, 50 miles east of Malaysia’s coast, in 2013.

Much of this muscle-flexing is political.
China is a rising power and the South China Sea is a logical place for it to exercise its growing strength.
The sea is a vital freight lane, through which a third of global shipping traffic passes. 


It is also a main focus of geopolitical jockeying for both Beijing and the United States, which has been strengthening its relations with the Philippines, Malaysia and Vietnam.
There is another reason for China’s interest in the South China Sea: the large quantities of oil and natural gas that might lie below these waters. 


In May, Beijing made its interest in those resources clear when it sent a drilling rig called Haiyang Shiyou 981 into waters claimed by Vietnam. 


The rig is owned by China National Offshore Oil Corporation, or Cnooc, the country’s biggest offshore energy producer.
After the move provoked a standoff with Vietnam, the drilling rig was sent to undisputed waters near China’s island province of Hainan. 


In September, Cnooc said the rig had discovered a large gas field, which suggested that China had become more proficient at offshore drilling.


The United States Energy Information Administration has estimated that 11 billion barrels of oil and 190 trillion cubic feet of natural gas lie below the seabed, including both proven and probable reserves. 


If those estimates prove correct, the South China Sea would be in the same league as Mexico, a midsize producer, and in the global top 10 in terms of gas.


The South China Sea is far from virgin territory.
But so far, exploration and production of oil and gas have been confined mainly to waters off the coasts of China, Vietnam, Malaysia, Brunei and the Philippines, which form the sea’s perimeter along with Taiwan. 


The Energy Information Administration estimates that in 2011, South China Sea production by these countries amounted to 1.2 million barrels a day of oil and 3,200 billion cubic feet of natural gas. These numbers are roughly similar to the current crude production of North Dakota and to Saudi Arabia’s annual gas production in 2012.


Oil and gas exploration has been limited not only by territorial claims but also by typhoons and technological challenges, including limited local ability to drill in deep water. 


Cnooc has tried to improve its capabilities through the purchase in 2012 of a Canadian company, Nexen, for about $15 billion. 


Nexen had acquired deep water experience from working in the Gulf of Mexico.


Researchers, too, are exploring deeper waters.
From Jan. 26 through March 30 of this year, the scientific vessel Joides Resolutiontraveled to the deeper regions in the middle of the South China Sea, where it drilled several core samples as part of the International Ocean Discovery Program’s Expedition 349.


Scientists from 12 countries, including China, the United States, Vietnam, the Philippines and Taiwan, participated.
Dr. Li Chun-feng of the State Key Laboratory of Marine Geology at Tongji University in Shanghai served as a director.
While emphasizing that the main goals were scientific, Dr. Li said evidence was found that there were “huge” oil and gas reserves beneath the sea.


“Our expedition discovered thick organic rich sandstone and shale at the outermost continental margin and the continent-ocean transition zone, further supporting the large potential for oil and gas reserves,” Dr. Li said.


New oil and gas pockets are being found.
The Canadian oil and gas producer Husky Energy and Cnooc began commercial production at their Liwan natural gas field in the sea’s northern waters in late March.


The gas, which Husky discovered in 2006, is about 190 miles southeast of Hong Kong and is the largest to date for Husky, which is controlled by the Hong Kong businessman Li Ka-shing. 


The gas is destined for the Pearl River Delta region, which includes the industrial cities of Shenzhen and Guangzhou.
To reduce the choking air pollution caused by burning coal, China wants to increase the proportion of gas in its overall energy use to 10 percent by 2020 from about 5 percent in 2012.


Gas from the South China Sea would fit well with this plan.