China, Vietnam spar over gas
HANOI - Just when it seemed China and Vietnam had buried their conflicting claims to the Spratly Islands, Beijing is contesting a new Hanoi-tendered, BP-led, US$2 billion natural-gas project near the rocky group of islands and reefs in the South China Sea. The flare-up marks perhaps the strongest indication yet that Beijing's soft-power overtures toward Southeast Asia are hardening when it comes to energy-security concerns.
The contested Moc Tinh and Hai Thach gas fields, in the Nam Con Son Basin about 370 kilometers off Vietnam's southeast coast, are both run by British energy giant BP through a production-sharing contract with state-owned PetroVietnam and in partnership with US oil firm ConocoPhillips.
The Chinese Foreign Ministry on April 12 claimed that the project encroached on its territory, saying "any unilateral action taken by any other country in these waters constitutes infringement into China's sovereignty, territorial rights and jurisdiction. We are firmly opposed to this." Hanoi has countered that the multinational-led project lies in its territorial waters and exclusive economic area, consistent with the 1982 United Nations Convention on the Law of the Sea.
Beijing first lodged its complaint during a visit by members of the Vietnamese National Assembly, symbolically led by its chairman, Nguyen Phu Trong. The contested project lies adjacent to the Lan Tay gas field and pipeline, which commenced construction in the late 1990s and came on-stream in 2003. Until now it had not stirred any official complaint from China.
Led by BP and in partnership with PetroVietnam, Lan Tay is Vietnam's first large-scale gas-supply-chain project, piping fuel to the 3,800-megawatt combined-cycle power plant at the Phu My industrial estate outside Ho Chi Minh City that is popular with foreign investors. The pipeline also takes gas from the Korea National Oil Corp's Rong Doi field.
The contested BP-led Moc Tinh and Hai Thach project, which will include a new pipeline designed to deliver gas to a common processing facility onshore, is scheduled to supply gas to new power plants totaling 2,640MW at Nhon Tach, some 60km east of Ho Chi Minh City. Vietnam's offshore oil reserves are dwindling and Hanoi is increasingly looking to natural-gas projects to help fill the gap.
According to projections compiled last year by the Asia Pacific Energy Research Center, Vietnamese energy planners aim to have 230,000MW of power-generation capacity installed by 2010, of which 70,000MW will be fueled by natural gas. By 2020, Hanoi hopes nearly to double that capacity to 440,000MW, with natural gas providing 120,000MW of the total power, according to the same projections.
At the same time, China has launched a global investment spree to meet its surging energy appetite, including recent politically risky forays in Africa. Beijing has expressed its desire to source more of its fuel needs from Asia, because of its security concerns about shipping through the congested Malacca Strait between Indonesia's Sumatra island and peninsular Malaysia. And securing new fuel sources in the nearby Spratly Islands would help to alleviate those concerns.
Old enemies, new friends
Relations between neighboring Vietnam and China have long been tense, including recent armed skirmishes in the late 1970s and '80s. The two sides fought a brief but bloody border war in the wake of Vietnam's invasion of Cambodia, which ousted the Beijing-backed Khmer Rouge regime. In 1988, Vietnam and China fought a brief naval battle over the contested Spratly Islands in the south-central area of the South China Sea.
In line with China's regional economic charm offensive, more recently diplomatic relations have warmed and commercial ties have blossomed. The two sides have in recent years launched "friendship and cooperation" meetings, including regular reciprocal visits from each country's top government leaders. Improved diplomatic ties have paved the way for Vietnam to develop new transport infrastructure in its northern regions, aimed at better connecting its manufacturing base with China's booming southern provinces. Bilateral trade reached $10 billion in 2006, up more than 21% year on year.
Overlapping maritime claims still overshadow those improved relations, as the new dispute over Vietnam's Nam Con Son Basin natural-gas project shows. Notably, progress has been made on long-contested land boundaries. China this year ratified a treaty signed last October defining precisely the point where the national borders of China, Vietnam and Laos meet. But settling maritime boundaries, particularly concerning the Spratly Islands, has proved more difficult precisely because access to potentially abundant oil and gas resources is at stake.
During the 1990s, disputes over the Spratly Islands were commonplace, with different regional actors at times forcefully staking their claims. Recently China, Vietnam and others with overlapping claims there - including Malaysia, Brunei and the Philippines - agreed under the Association of Southeast Asian Nations' (ASEAN's) Declaration on the Conduct of Parties in the South China Sea to resolve any future disputes peacefully.
The Nam Con Son Basin area, the focus of the current disagreement, is a potentially important regional energy source. Most of Vietnam's present oil production is based closer to shore in the Cuu Long Basin, but in Hanoi's drive to secure new energy sources the more distant Nam Con Son Basin has become a focus of Vietnam-tendered, multinational-led exploration. Shell and ExxonMobil are operating in blocks that Vietnam claims but could also be subject to claims by Beijing.
Despite the high stakes, it does not appear that the latest bilateral squabble will escalate into full-blown saber-rattling - as past contested claims have, including China's seizure of the Paracel Islands from Vietnam in 1974. The Nam Con Son issue was discussed at a regular annual meeting between senior foreign-ministry officials from the 10 ASEAN member states and China in the Chinese city of Anhui between Monday and Wednesday last week. The matter was examined in the context of the Declaration on the Conduct of Parties in the South China Sea.
Beijing said shortly after making its claim to the territory on April 12 that the two sides had a consensus to resolve their disputed maritime boundaries around "the principle of shelving differences and seeking common exploration". The Chinese Foreign Ministry spokesman said in mid-April, "We should not take any unilateral action that will further complicate the situation."
A few days afterward, a delegation of Vietnamese government officials and army officers visited the Spratlys, sent ostensibly to celebrate the 32nd anniversary of the islands' liberation from the old US-backed government of South Vietnam, but which also entailed an inspection of troops in islands just to the north of the archipelago stationed clearly to defend against potential Chinese expansionism.
By Andrew Symon - Asia Times - May 1, 2007.
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