Forget Oil and Gas, the South China Sea Just Got More Complicated


As former-best-friends-turned-sour during the Cold War, the Sino-Vietnamese relationship has managed to overcome a number of issues and has progressed to levels of cooperation unimaginable only 10 years ago.

Vietnam’s civilian-led patrols, backed by marine police and a border force, will be deployed from 25 January within Vietnamese waters in the South China Sea. Photo: Reuters

But conflicting territorial claims in the South China Sea continue to risk derailing any significant cooperation between the two countries. Where the dispute once focussed on the promise of untapped hydrocarbon resources in the region, the nature of it has now changed – it has become a struggle symbolic of something much more important than oil and gas.

The US Energy Information Administration concluded in 2013 that the contested areas of the South China Sea are unlikely to have any significant oil and gas deposits. But the fact remains that even if any were discovered, these would prove too expensive to extract. The cost of drilling a deep water well is around $30 to $60 million, or about five times more than drilling in shallow waters. And while the cost may not put all investors off, the risk of becoming mired in a political dispute will. The 2009 BP pullout from a joint Vietnamese exploration in disputed territory was testimony to these concerns. As BP became threatened by China, Vietnam also applied pressure to prevent its withdrawal. Faced with this catch-22, BP finally backed out due to “commercial and technical reasons.” In other words, the project was scrapped for being unprofitable.


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