China Sends Oil Rig To Disputed Waters

Tyler Durden's picture

Submitted by James Burgess via OilPrice.com,

Over the weekend of May 3 and 4, China sent an oil rig into disputed waters of the South China Sea to begin oil exploration. The rig is near the Paracel Islands, inside the 200-mile exclusive economic zone of Vietnam, which angrily protested the decision. The Vietnamese government insists that the waters, as well as the oil and gas reserves held beneath, belong to Vietnam.

  • VIETNAM CANNOT ACCEPT AND STRONGLY OPPOSES CHINA RIG PLACEMENT

Where boundaries are drawn in the South China Sea has long been a source of regional tension, but China has escalated the conflict by moving to drill the first well inside disputed territory. China said the oil rig would be operating from now until August 15.

Some observers see the move as a careful calculation by Beijing, which believes Vietnam won’t be willing to risk war over Chinese drilling. “It's going to be one more of these small, incremental steps that individually won't lead to conflict, but collectively, over time, gradually will change the status quo,” said Admiral Mike McDevitt U.S. Navy (Ret.), according to Foreign Policy.

For its part, Vietnam is demanding that China cease drilling operations. “All foreign activities in Vietnam's seas without Vietnam's permission are illegal and invalid,” Vietnam’s Foreign Ministry said in a statement. “Vietnam resolutely protests them.”

The move may also be a response to U.S. President Barack Obama’s recent trip to Southeast Asia, which included a deal with the Philippines to allow for a greater American troop presence in the region. The U.S. and the Philippines kicked off a two-week long military exercise on May 5.

The U.S. Energy Information Administration estimates that the South China Sea holds 11 billion barrels of oil and 190 trillion cubic feet of natural gas, most of which is located in disputed territory. China believes the oil and gas reserves could be much larger.

 

The question now becomes, after his recent Asia trip, is this another red line being crossed for President Obama?

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suteibu's picture

Too funny!  Too bad the US lost the Vietnam War.  All of that oil and gas could be theirs.

Xibalba's picture

I'm sure the Americans will be back

markmotive's picture

Resource acquisition is a matter of life or death for China. Therefore China will take geopolitical risks in order to make those acquisitions.

The next world war will start because China's demand for resources is pushing up against the West's current supply.

http://www.planbeconomics.com/2013/07/oil-war-china-vs-japan.html

DoChenRollingBearing's picture

All of a sudden, Robert D. Kaplan's new book (2014) Asia's Cauldron, looks very timely.  It is about China's aggression into the South China Sea.

I guess that book is No. 1 on my reading list now.

So What's picture

This is all related to Ukraine.
A little history: Russia aided Vietnam during Vietnam war with America and later war with China in 1979. Vietnam has always aligned with Soviet Union and later Russia against China.
The Ukraine situation, China and Russia must have agreed and Russia is throwing Vietnam under the bus for China's backing on Ukraine.
Ultimately, Vietnam will have no choice but to go into the arms of the US.
This is a terrible move by China. China encirclement is now complete.

spine001's picture

Terrible? Imho it's a great move by China. While everybody else is destroying themselves and wasting non renewable energy, the chinese are investigating the energetic worthiness of the regions in conflict. I see this move as a great long term strategic move by China.

So What's picture

IMHO, the US will then have two proxy wars: Ukraine and South China Sea with Phillipine, Japan, South Korea and Vietnam.
With Vietnam spearheading the land war and the other three countries for the sea war, China and Russia will be bled dry and reduced to dust. Or nuclear wars. The Neo-con must be popping champagne tonite.

suteibu's picture

Perhaps, though I do not believe that South Korea will play ball.  They have the best relationship with China of all the East Asian countries and one of the worst with Japan.  They would probably sit this one out.

knukles's picture

This is what one gets for sending Moochelle for vacation.

Manthong's picture

Obama ought to call the Chinese Premier and firmly tell him how much he is disappointed.

Obama Biographer: 'The World Seems to Disappoint Him'... 

TruthInSunshine's picture

Obama's Russian #Reset

Obama's Asian #Pivot

#DoubleFail

TheRedScourge's picture

If the US wanted to show some balls here, they'd pick a nice spot just inside Chinese waters and set up four Vietnamese exploration rigs with a US carrier escort.

old naughty's picture

@DCRB,

Does Kaplan's book mention anything about TPP?

I thought TPP is all about IP...But, here's one to ponder:

Obama did not get his fast-tracked agreement in Japan (mainly due to import levies on cars and produces) so a new First-Minister round is rumored to be held May 12-15 in Vietnam.

So the oil rig inside Vietnam's 200-mile eez, hummmmm (!?)

 

aVileRat's picture

North Korea is the knight to their bishop. They are not moving anywhere and are equally mad at Abe for wrecking the implied ASEAN deal of being the workshop to Japanese trade houses.

China is just testing the waters like Putin did with Ukraine. Recall the whole current drama started when Yanukovich was pushed by Putina to give the black sea fleet a free lease for 100 years and the Rada protested that a backdoor deal on Sevastapol would constitute a state asset sale of Crimea to the Russian Navy. In response, Putin threatened and then offered free money vs. the accepted EU deal that would have given the Ukraine enough money to turn down the Crimea for Trade markets deal.

Putin did not like that, so he invaded a country with a large non-carded ethnic population.

As I said a few months ago, google the number of Han Chinese in Vietnam. Over 38% of the population of Vietnam are expats or landed Chinese post-Vietnam War.

Now think about what kind of well results can be found in Google cache to have been declared commercial since November 2013.

Ah well.

TGR's picture

Got a link for the 38% claim? Sounds completely wrong to me.

//
Spumoni's picture

My take on the history of the region suggests that there has been intermittent war between the Han and the Vietnamese for some 3000 years-pretty much always over resources. A good read on the subject is "Fire In The Lake,"  don't recall the author. Another example of a genetically unified population (courtesy of 3 millenia of rape) still arguing over whose tribe they belong to.

Just send Bourdain back over there - he'll feed 'em up and they can settle their differences on full tummies.

james.connolly's picture

vietnam is chinese in all way's from eating dog, .. to lifestyle,... to sanitary ..

Vietnam doesn't have much comparison to other SE-ASIA,... its like CHINA in SE-ASIA,... in other words crowded and nuts.

**

South KOREA is a USA/CIA puppet state, they will like TAIWAN do what they're told until the USA implodes, .. if it ever does.

>>>

CHINA is investing in VIETNAM and all of SE-ASIA,... what has the USA done? FUcking nothing.

If the USA plays a "UKRAINE" in Vietnam, the people will VOTE for chinese hegemony.

Anusocracy's picture

Two proxy wars that the proxy warriors will lose and the US will commit suicide if it engages Russia and/or China in a hot war.

The US has been beating up on punching bags for a half century, Russia and China can punch back.

james.connolly's picture

If the USA does nothing the USD will implode,

If the USA fights the Chinese/Russian's, how can it lose?

The USA still has the SAUDI oil, and CHiNa must buy.

The USA can print FIAT to INFINITE to invest in WAR, nobody else can do this, ...

FIAT to INFINITE got us here, and FIAT to infinity will keep us here,  ...

WAR, ... its the future.

Will 'we' lose fuck yes, ... but so what its' not about the USA, its about the USD, ... cleverly even if the USA loses, DEBT will have to be paid to RUSSIA/CHINA in USD, as the USA has nothing else.

Get it?

 

Anusocracy's picture

I meant war ending up going nuclear.

Omegaman2211's picture

You have quite the imagination.

PacOps's picture

Spine: Gotta agree. As much as I dislike Chinas tactics. They are very long stratigic thinkers.

Now, exploratory drilling usually takes place after exploration with seismic equipment and recorders to locate where to drill in the most probable productive places. This takes time and computer analysis on the front end before going to expense of moving a sea going rig into position. Unless they are "wildcatting" and wildcatting with an off-shore rig is very risky to the point its just not done ... unless they are just testing the political waters and expense be damned.

If they find something productive its then time to move in with more drilling rigs to "develop" the find.

I worked the oil patch, mostly for Pertimina, the Indonesian Oil Co., back in the 70s on the exploration seismic side and positioned the off-shore rigs for drilling and developmental activity.

Pertamina is a huge entity to its own in terms of government within Indonesia. 

A most interesting development that we will surely be discussing off and on as this progresses.

Matt's picture

Well, in order for there to be estimated reserves of billions of barrels of oil and 190 trillion cubic feet of natural gas, someone must have done some exploration, right? I mean, they aren't just guessing there is oil and gas?

CrashisOptimistic's picture

It's a bit more than a guess.  But not a lot more.

Only one out of 4 exploration wells finds something.  That's onshore.  Offshore it's worse.  

It's a lot of money flushed when it's dry, and it usually is.

The seismic studies find structures.  Oil is found only in those structures.  But it's not always found in those structures.

It's not at all uncommon for projected reserves in some place to be taken down a factor of 10 after exploration.  This happened recently in Alaska.  Here:

http://en.wikipedia.org/wiki/National_Petroleum_Reserve%E2%80%93Alaska

james.connolly's picture

CHEVRON mapped out all the under-ocean water off vietnam back in the 1970's/1980'sw using 3D, its all been mapped into color, and everybody knows where the OIL is, ... it just was'nt ready to be pumped, perhaps nobody willing to pay for the offshore rigs,

But know this troops, the VIETNAM war was about OIL, and even after the WAR, the USA oil companys stayed and worked the area, ... and never quit doing seismic analysis.

813kml's picture

The move is also timely since the Eye of Sauron is trained on Ukraine at the moment.  This could be part of Russia/China strategy to stretch US attention thinner, the US could not fight a war on two fronts.  Three if you count the impending unrest by US citizens.

spine001's picture

If it wasn't real it'd be funny. While the US plays war games that they can't possibly ever use, the chinese start drilling for oil. You really can't make these things up.

HardlyZero's picture

Ahh.  So when is the referendum ?

suteibu's picture

So, Ukraine/Russia is no longer a problem that could trigger a war?  Damn...all of that hype for nothing.

MeMongo's picture

Exactly sut It's Syrin mooselimbs killing Saudi Gentiles, and Isralie Amish killing all of the goat fukers, that of course have to kill all of the White kids playing the knockout game in Philly, Detroit..where the chinks are making a killing, next to pimp my ride sickcago just found out that rahm my people holder hang out, just took the 2 popes and made them make a mockery of the rabbi organ harvesting rackit that Harlem is SO known for.............seehow it works Sut? Plug whatever the fuck it is into the main frame and lo and behold rainbow riding skittle shitting unicorns will appear....note to self ..enjoy resposibly

newbie vampire's picture

The Obama adminstration has to sign up Vietnam in a new strategic defence treaty or he is not gonna get his war with China. 

BandGap's picture

The US is closer to Viet Nam than ever. They use Viet Nam ports for fueling and R&R.

This was the hot spot I thought would ignite things. Then Libya, Syria and Ukraine came along. Back to the front burner.

The Vietnamese WILL not take shit from China. They kicked their asses completely the last time out in the 80s. Viet Nam has real fucking issues with China, the Russians supplied Viet Nam with arms during the US- Viet Nam war. NOT the Chinese.

Rakshas's picture

....... seems to me both the Soviets and the Chinese backed Vn during the american war, China had divisions ready to come in should the US have invaded the North; China threw VN under the bus abit later in the game after the Nixon visit and then attacked in 1979 after the Vietnamese invaded Cambodia though few remember the massacre of the 3 or 4 thousand Vietnamese that was carried out by the come-here-rouge Pothead that precipitated the VN invasion.  China attacked along the northern border and basically got thier asses kicked by Vietnamese chicks (they called them militia but mostly women) as Hanoi was keeping thier regulars in reserve should the Chicoms approach Hanoi....... the general feeling was the US had some role to play in the whold debacle as well.  While the entire engagement was limited and no doubt China could have inflicted much more damage than it did they still got mauled pretty badly on the whole and I think it can be viewed as a testament to the conviction of the VN people to maintain thier freedom from overlords.  It may be a third world country in a number of ways to this day and communist but I can tell you I feel far more free walking the streets of Hanoi right now than i do on any american street........and a hell of a lot safer too......

....... and that concludes today's hyperinflated $0.02........ 

PacOps's picture

Yes ... And don't forget the Cubans. Active on the intel side for the VC and NVA with boots on the ground in-country.

(I was IBM-GEM PacOps - '66-'70 in Nam)

DarthVaderMentor's picture

Bob Tanner? You work at TSN? I was the only Beemer that spoke fluent Russian and Spanish that was up at the SOG helping out with the Phoenix crowd. My Dad was the one that trained the team that finally sorted out the "Bolivian Affair".

 

BandGap's picture

Almost all the weapon systems employed by the VN against the Americans (AA, tanks) were Russian. China and Viet Nam have never gotten along. At one point, around 1980, the VN had the third largest standing army in the world.

They will not take shit from the Chinese.

newbie vampire's picture

Yeah, I can still recall the tears in the eyes of the Vietnamese when the US withdrew from Vietnam. I can also remember the heroics of the brave Japanese soldiers who bravely defended US troops during the Vietnam "Misunderstandin" too.  

Jugdish's picture

Ya too bad the Mongols lost their Vietnam war too bad the Chinese lost their Vietnam war too bad the French lost their Vietnam war. Too bad the US lost their war. Too bad the LA Clippers have a racist baskeketball coach that refuses to do an interview with Oprah. Let's try to stiick to stuff that's going on here.

Tom_333's picture

Too many red lines....too few men with guns. The U.S. have lately without much fanfare and advertisement conducted the largest reduction in  armed forces since end of WWII. Foreign observers who always are calculating power balances have last years begun to doubt that the old doctrine of conducting 2,5 wars in two geographically very distant places really is something that can be executed. So it´s a safe bet to assume that there will be more of these things to come. More resource conflicts. More border fights. Often erupting in tandem across the world. If it ain´t Ukraine it may be Asia...and so on. The trick being played to their own advantage by foreign powers is to pick up on the invite from State Department , CIA and the rest of them and begin to respond to the covert shit and NGO delivered policies drawing in the west to an extent that the west may not want to be drawn in. Or can afford to be.

When stating this the inevitable counterargument that the U.S. still outspends by far all other major powers for defense will be raised... which is true. However the playbook for the American armed forces also seem to have been redacted and future work may be much closer to home which to a degree off-sets still high spending. Maybe the armed forces will be doing much more work  in ConUS. Or in other words - change you can believe in and never let a good crisis go to waste may have different consequences than what the sheeple understood it to be.

Jadr's picture

Yeah the US has undergone a huge reduction in armed forces, going from 4% annual spending increases to 3%, such a huge disarmament.

 

Have you considered that the US is reducing the number of actual armed military personnel because the next phase in war is using robots?

Tom_333's picture

Yes. And they are soon coming to a place near you by the look of things.Lot of guns to be collected.

CrashisOptimistic's picture

Chinese domestic oil production is a state secret.

Best guess is about 4.7 mbpd.  Largely flat.

Domestic consumption 10+ mbpd.  And growing steeply.

That is all you need to know.

CrashisOptimistic's picture

Oh btw, that excludes Hong Kong (0 domestic production, consumption about 400K bpd).

and Taiwan (0 domestic production, consumption about 1 mbpd).

China probably would care more about HK than Taiwan.

Regardless, they need more and more and have less and less.

mumcard's picture

Not to mention the lack of clean drinking water.  China will go hunting for resources.

nmewn's picture

Every hour is like 3:00AM for Obama.

Today he admitted he can't really hold back the oceans like he promised...lol.

suteibu's picture

Indeed.  The US instigates most of the trouble around the world (and handles it poorly).  How will they react to trouble started by someone else?

MeMongo's picture

Sorry Sut too tired to write that shit again as posted above but the whole game will go on... as a couple yentas used to say schlemeel ,schamazle, hazenfeffer. Incorporated........Their gonna do it.......weeee!