Race for oil heats up territorial disputes in the South China Sea

The expansion of oil exploration and drilling in the South China Sea has raised the stakes in the various territorial disputes between China and its neighbors, particularly the Philippines.

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Rapidly expanding oil exploration looks likely to escalate territorial disputes in the South China Sea, which is suspected of containing vast oil and natural gas resources.

A Philippine company, Philex Mining Corp., announced Tuesday that it plans to drill at least two wells and expand its surveys in Reed Bank, one of the most contested areas of the South China Sea, the Wall Street Journal reports.

China claims the sea in its entirety and several other countries in the region, including the Philippines, Vietnam, and Taiwan, claim parts of it.

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Within 24 hours of that announcement, the Chinese Communist Party newspaper People's Daily published an editorial arguing that Philippines' efforts at resolving territorial disputes "lack sincerity," citing construction by the Philippines' military on a disputed island. Titled "Some countries will pay for misjudging China's sovereignty," it also issued a veiled threat to countries that "freely encroach on China's territory."

The basic consensus of China and ASEAN countries is that the urgent task of ensuring the stability of the South China Sea situation is to keep self-control and not to take actions that may make the dispute more complex and expansive and affect the world peace and stability. The behavior of the Philippines is the invasion of China's territory and also the destruction of the ASEAN position. …

China has put forward the principle of "shelving certain disputes for common development" [a] long time ago and has followed this principle. Related parties should fully understand that China's principle and position do not mean that China will allow certain countries to freely encroach on China's territory. Any countries that made serious strategic misjudgment on this issue will certainly pay a high price.

While not directly addressing the accusations lodged against Manila in the editorial, the Philippines' Foreign Secretary Albert del Rosario said today that his country is committed to international law and a peaceful resolution, and said Manila would raise the territorial dispute with the United Nations, the Associated Press reports.

Last month, China, Vietnam, the Philippines, and several other Southeast Asian countries agreed to a preliminary set of behavioral guidelines for the region that would bar countries from resorting to threats or violence to resolve disputes and requests that countries exercise self-restraint, Chinese wire agency Xinhua reports.

Philex's move is only the latest in a series of survey projects that have caused "dust-ups" in the past, the Wall Street Journal reports. A Philex-owned company conducted additional exploration earlier this year, as did the China National Offshore Oil Corp. and Vietnam's state-owned Vietnam Oil & Gas Group. Earlier this year, the Philippines accused China of intimidating Philippine oil exploration ships.

The Philippines also announced this week that it plans to auction off areas of the sea for private oil exploration. The areas are far from the disputed Spratly Islands and are within the country's 200-nautical-mile exclusive economic zone, Energy Undersecretary Jose Layug said, according to Agence France-Presse. At least three Chinese oil companies have expressed interest in putting in a bid.

However, AFP notes, China has been known to claim parts of the sea that authorities of the Philippines say are very clearly their country's.

The Wall Street Journal reports that technological advances in oil and gas exploration and high energy prices have increased the interest in oil exploration. With deep water drilling on the rise, countries are able to drill for oil farther from shore than they previously could, making it economically crucial to control as much offshore territory as possible.

And with oil prices at a peak and Asia's demand expanding much more rapidly than its supply, there is urgency to ramping up exploration and production.

The China National Offshore Oil Corp. (CNOOC), for example, plans to drill four to six deep water oil wells in 2011 and to significantly expand its deep water oil exploration. A company spokesman said the company would comply with whatever territorial guidelines the Chinese government lays out.

"Right now, China is not too aggressive there, but once it has the technology, it will go more aggressively" in the area, said Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University in China. "It's a race. This [sea] is disputed, it has a resource, and whoever can get more of it can get more," he said. If other countries are prospecting, "why wouldn't China?"