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Energy Potential in Disputed Waters

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, Brunei and Taiwan.

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, last year.

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.

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.

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 US$15 billion (RM48 billion). Nexen had acquired deep water experience from working in the Gulf of Mexico.

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.

nst.com.my Edited by Topco)