By Eric Watkins
LOS ANGELES, May 17 – The Hai Yang Shi You 201, a pipe-lay vessel owned by China National Offshore Oil Corp., this week set sail for the Liwan 3-1 gas field in the South China Sea where it will prepare for pipe laying works
The Hai Yang Shi You 201 is China’s first domestically designed and built deepwater offshore engineering vessel and “advances the nation’s deepwater resources exploration strategy,” according to Chinese state media.
The news may seem as just another effort by oil companies around the globe to secure crude oil or natural gas in ever more difficult circumstances. Lending the matter further credibility, Canada’s Husky Oil is CNOOC’s partner in the Liwan gas project.
But for some observers, news of the departure of the Hai Yang Shi You 201 may seem a bit more ominous, serving as yet another example of China’s growing assertiveness in the region and around the world.
The departure of CNOOC’s deepwater pipe-lay ship came just days after the firm’s first deep-water drilling rig 981 began operations near islands in the South China Sea in a move said to assert Beijing’s territorial claims.
“Large deepwater drilling rigs are our mobile national territory and strategic weapon for promoting the development of the country’s offshore oil industry,” said CNOOC Chairman Wang Yilin.
In a word, wherever Chinese rigs go, there goes the national territory.
Erica Downs, an expert on China’s national oil companies at the Brookings Institution, said that drilling exploratory wells in the South China Sea is part of CNOOC’s strategy for growing reserves and production and profits.
However, Downs also said that Wang’s comment that CNOOC’s rig is a tool for advancing national interests may “harden the views” of those outside of China who view CNOOC and its domestic peers as “mere arms of state policy.”
STATE POLICY ARMS
The potential for China’s oil companies to be arms of state policy certainly exists, according to Stirring up the South China Sea, a report published by the International Crisis Group.
“Some of the most important potential quasi-governmental actors in Chinese South China Sea policy are the national oil companies,” ICG said, identifying the companies as CNOOC along with China National Petroleum Corp and China Petrochemical Corp.
So far, according to ICG, Chinese oil companies’ interest in exploiting hydrocarbons reserves in the waters around the disputed areas has been limited due to the unclear status and political sensitivity of the South China Sea issue as well as financial and technological concerns about the feasibility of such operations.
“These companies, especially CNOOC, which is the only one possessing deep sea drilling technology, have been trying to overcome these obstacles,” ICG said.
“They have been urging the central government to sponsor and approve energy exploration in the disputed waters in the South China Sea, arguing that such actions would help reinforce China’s sovereignty claims in these areas.”
Beijing has been reluctant to support them so far, ICG said. But it noted that CNOOC’s decision to take bids on developing energy reserves in some disputed waters near the Paracels in May 2011 has “raised questions” on whether the factors constraining these companies are “as strong” as they once were.
ICG said the Chinese companies could expand their operations into the disputed areas in the future, if they decide that the benefits of drilling in the South China Sea outweigh the obstacles.
“The fundamental incentive for energy companies to explore the South China Sea is the lure of profits from potential oil and gas resources, which are played up by the media … as a ‘second Persian Gulf’,” ICG said.
BONANZA AWAITING THEM
The Chinese companies certainly do see a bonanza awaiting them beneath the waters of the South China Sea.
“The oil and gas reserves in the South China Sea are reported to be abundant, accounting for about one-third of total oil and gas reserves in China, of which 70% is located in a deepwater zone covering 1,537,000 square miles,” said a report by China Business News.
That report is the same one that announced the departure of the Hai Yang Shi You 201, and it added that the ship’s collaboration with CNOOC’s 981 drilling rig marks “the beginning of the practical stage of deepwater resources exploration for China.”
Given Wang’s remarks about drilling rig 981, however, it also means that the Hai Yang Shi You 201 must be considered a “strategic weapon” for promoting the development of the country’s offshore oil industry.
According to Downs of the Brookings Institute, Wang’s remarks are striking because he is linking CNOOC’s drilling to a national interest, beyond oil companies’ normal interest in energy security.
That linkage may not necessarily portend anything like a unilateral move by China into disputed waters to undertake exploitation of subsea oil and gas reserves.
But then again, that’s a possibility that can’t be ruled out either.
© Glamma Productions Inc. 2012