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Offshore energy competition: China, Japan, Vietnam and India

Updated On: Jan 12, 2009

China and Japan have their own issues over gas fields in the East China Sea called Tianwaitian in Chinese and Kashi in Japanese; Japan protested that China was unilaterally developing the Tianwaitian field even though both sides had agreed to negotiate its status under a 2008 agreement while China argued that the field is in its territorial waters. But it need not be a case of conflict too. Japan and China had struck a deal in June 2008 to end the long-running dispute over gas fields in the East China Sea by jointly developing one of them and holding talks on the others. To resolve such energy issues and other pressing matters, strategic dialogues have been held between Japan and China since 2006.

Another possible source of conflict and tension in offshore areas are pipelines. India, capitalizing on its strategic location, has mooted out plans to be a connector of pipelines between the different regions of the world. Petroleum Minister Mani Shankar Aiyar argued that India should create a pan-Asian forum and leverage the power of offshore and onshore gas and pipelines for the benefit the Asian continent, for which India can dip into its vast reserves of foreign exchange for investment in pipelines to run through its territory, connecting the various regions of the world.

Indian-owned Oil and Natural Gas Company (ONGC) has invested US$3.5 billion in overseas exploration since 2000, including offshore gas fields in Vietnam, as well as energy projects in Indonesia.  By moving into Vietnam, India may be brushing against Chinese energy and territorial interests. On 23 November 2007, the Vietnamese government launched a complaint against Chinese naval exercises in their disputed waters in the South China Seas in the area of the Spratly and Paracel islands (also claimed by Indonesia, Malaysia, the Philippines and Taiwan); China had previously been offended in 2004 when Vietnam renovated an airfield on the disputed Big Spratly Island and expanded Vietnamese tourism to the chain.

This dispute had been quiet other than the two above incidents because of Beijing’s clout in bilateral trade and the increasing importance of its economy for Vietnam, eventually even persuading Vietnam to accept joint exploration of these disputed areas. However, despite the understanding between Hanoi and Beijing, Vietnam has nonetheless sought its own partners for offshore energy exploration. In June 2007, Chinese pressure forced BP suspended offshore exploration operations in Vietnam’s Block 5.2 and Beijing moved quickly to object to India’s Oil and Natural Gas Corp. (ONGC)’s presence in Blocks 127 and 128, which China claimed fell within the disputed territories and thus could only be explored and exploited by Chinese and/or Vietnamese companies.  Offshore pipelines in addition to energy resources are likely to be become increasingly important. Thus, there may be a need to have more dialogues, cooperation and institutions to help reduce the possibilities of tensions and conflicts over underwater resources.

Sources:

Bajpaee, Chietigj, "India, China locked in energy game" dated 17 March 2005 in Asia Times website [downloaded on 9 Jan 2009], available athttp://www.atimes.com/atimes/Asian_Economy/GC17Dk01.html.

Reddy, Balaji, "India calls for Asian Gas grid connecting India, China, Japan to Gas producing areas of Asia – wasting billions on Gas pipes instead of research and implementation of alternative fuels" dated 15 Feb 2005 in the India Daily website [downloaded on 9 Jan 2009], available athttp://www.indiadaily.com/editorial/1624.asp.

Stratfor, "Summary" dated 4 Dec 2007 in the Stratfor website [downloaded on 9 Jan 2009], available athttp://www.stratfor.com/analysis/vietnam_china_dispute_over_significant_...







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