How will China React to Gazprom Prospecting in Vietnamese Waters?

It is hardly a secret that Beijing’s claims to nearly all of the South China Sea’s waters have elicited concern from Southeast Asian nations.

Now Russia’s state-owned natural gas giant Gazprom is upping the ante by announcing that it intends to start gas production off Vietnam’s coast in June. Gazprom Deputy CEO Vitaly Markelov told Gazprom magazine, “It is planned to build 16 exploitation wells to develop the deposits. Currently, the project is at the deposit development infrastructure stage. Work continues on building the fourth exploitation well at the WHP-MT1 extracting platform (the Moc Tinh deposit). Gas extraction is expected to start in June 2013.”

Exploratory drilling and seismic surveys by Gazprom in Vietnam (extended block No.112) and location of blocks Nos.129–132

Last year Gazprom received stakes in developing Blocks 05-2 and 05-3 in the southeastern part of the South China Sea. Gazprom has since opened two gas condensate fields in the Moc Tinh (05-3) and Hai Tchach (05-2 and 05-3) blocs, with reserves estimated at 55.6 billion cubic meters of gas and 25 million tons of gas condensate. The deposits are located 189.8 miles from Vietnam’s Vung Tau coastal area. The Nam Con Son underwater gas pipeline is in close proximity to the blocs, which are at depths of 330- 450 feet.

Note the distance offshore of the concessions. According to the Third United Nations Convention on the Law of the Sea (UNCLOS), which came into force in November 1994, UNCLOS recognized 12 nautical miles as normal for territorial seas and waters while UNCLOS Part V, Article 55 defined an “exclusive economic zone” (EEZ) for countries with maritime frontiers as extending 200 nautical miles from a nation’s coastline.

Not surprisingly, Vietnam has voiced vociferous opposition to Beijing’s South China Sea claims.

The U.S. government’s Energy Information Agency has waded into the dispute over the potential riches at stake as in its updated “South China Sea” brief, issued on 7 February, after noting, “The South China Sea is a critical world trade route and a potential source of hydrocarbons, particularly natural gas, with competing claims of ownership over the sea and its resources,” goes on to add, “EIA estimates the South China Sea contains approximately 11 billion barrels of oil and 190 trillion cubic feet of natural gas in proved and probable reserves.”

The U.S. Geological Survey has far higher estimates, calculating that the South China Sea may contain roughly 28 billion barrels of oil, while the Chinese government calculates that the South China Sea region contains nearly 200 billion barrels of oil. No one knows for sure, especially as the Chinese Navy harasses and chases off foreign survey vessels.

A bit of history here.

In 1974, during the Vietnam War, the Chinese military drove South Vietnamese troops out of the Paracel Islands, which were claimed by Beijing, Hanoi and Taiwan. Five years later, in February 1979 a brief Sino–Vietnamese war erupted on the border between the two ostensibly Communist powers. Also known as the Third Indochina War, China launched the offensive in response to Vietnam's invasion and occupation of Cambodia in 1978, which ended the murderous reign of the Chinese-backed Khmer Rouge. Both sides lost thousands of troops, and relations between the two have remained coolly formal ever since.

Which brings up the question – why is Gazprom seeking to fish for hydrocarbons in such troubled waters?

By. John C.K. Daly of Oilprice.com