Territorial Feud To Keep Deepwater Dreams In Check

BMI View : China's bold incursion into the disputed waters of the South China Sea is reigniting tensions with Vietnam. Given the high military risk involved, it is likely that China National Offshore Oil Corporation (CNC)'s deepwater exploration will be cut short and these waters will remain untouched, until a political settlement between the claimants of the South China Sea is made. Until then, there will be a de facto moratorium on upstream activity in these disputed waters.

China's unilateral decision to put an oil rig in disputed waters in the South China Sea has reignited territorial tensions with Vietnam. In early May, Chinese state-owned China National Offshore Oil Corporation (CNC) moved its deepwater CNC 981 rig to an area near the Paracel Islands, which Vietnam claims to be within both its Exclusive Economic Zone (EEZ) and continental shelf under the 1982 UN Convention on the Law of the Sea (UNCLOS). China has maintained its legal right to drill in what it deems as its waters, while Vietnam has condemned China's actions.

At the time of writing the dispute had escalated, with a Chinese vessel having reportedly rammed into two Vietnamese Sea Guard ships and deployed water cannons, injuring six Vietnamese crew members in the process. The situation looks set to intensify unless China retreats, given that other South East Asian countries are also involved in the South China Sea dispute and are likely to back Vietnam against perceived Chinese aggression.

Waters Of Contention
Map Of The Disputed Areas In The South China Sea

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Related sectors of this article: Oil & Gas, Upstream, Exploration, Deepwater, Energy Policy
Geography: Vietnam, China, Philippines