The Chinese government is looking to foreign businesses to help find oil and natural gas under the South China Sea.
Yet China expects to meet resistance because other countries dispute Chinese territorial claims to much of the sea. In addition, observers say any oil and gas discoveries might not be very profitable.
Last week, China’s state-operated China National Offshore Oil Corporation made an appeal for foreign help. The company said it wants to work with foreign businesses in exploring for fossil fuels in 22 areas south of the country’s coastline.
When combined, that represents more than 47,000 square kilometers of territory. The governments in Taiwan and Vietnam also claim those waters. Vietnam has been outspoken about its claims since the 1970s.
Foreign oil companies are now studying the Chinese offer, which closes in September. Experts say the companies may be worried that any work they do for China could hurt their ability to work for other countries. And they say the companies may also be worried that any oil or gas they find could be claimed by China’s neighbors.
Thomas Pugh works for the Capital Economics research service in London. He says if foreign companies start working with “China and Chinese firms, they could risk not being allowed to work with other countries…who are disputing ownership of the area.”
Raymond Wu is the managing director of e-telligence, a Taipei-based service that specializes in political risk. He also notes that any oil and gas discoveries could be claimed by other countries.
“The other contestant parties do not accept that China has sovereign claims,” Wu said. He noted that foreign companies must face, in his words, “not only the difficulty or uncertainty of finding oil, but who does the oil belong to? I don’t see many investors willing to get into it at this point.”
In May 2014, Vietnamese and Chinese boats sailed into each other near the Gulf of Tonkin, after China deployed oil drilling equipment in the area.
Brunei, Malaysia and the Philippines have been worried about Chinese attempts to increase control over about 95 percent of the 3.5 million-square-kilometer sea. Over the past 10 years, Chinese crews have been creating islands for military aircraft and radar systems.
Companies need costly equipment to search for oil and gas, and it is not clear how much of it they will find.
Zhao Xijun is the deputy chief of the School of Finance at Renmin University of China. He says the China National Offshore Oil Corporation (CNOOC) is working to lessen the risk of exploration by working with foreign companies.
“The first thing is that risk is pretty high and second, the technical requirements are rather high,” Zhao said. “So perhaps the organizations or companies able to participate in this project would face a certain hurdle.”
Experts say falling oil prices would limit the value of any undersea discoveries. World oil prices have fallen from more than $100 per barrel in 2013 to about half that.
The United States Energy Information Administration estimates there are about 11 billion barrels of oil under the sea and 190 trillion cubic feet of natural gas.
Over 40 years ago, the Philippines began searching for oil west of Palawan Island, at Reed Bank. In 1984, a Philippine company discovered an oil field in the area. It now supplies 15 percent of the oil used in the Philippines.
Malaysia has found about five-billion barrels of oil and 80 trillion cubic feet of natural gas, more than any other country with territorial claims to the South China Sea.
I’m Caty Weaver.
Ralph Jennings in Taiwan reported on this story for VOANews.com. Christopher Jones-Cruise adapted his report for Learning English. George Grow was the editor.
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fossil fuel – n. a fuel (such as coal, oil or natural gas) that is formed in the earth from dead plants or animals
outspoken – adj. talking in a free and honest way about your opinions
allow – v. to permit (someone) to have or do something
contestant – n. opposing parties; a person who takes part in a contest
sovereign – adj. having independent authority and the right to govern itself
hurdle – n. something that makes an achievement difficult
barrel – n. the amount of something in a barrel