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United States
Energy Information Administration
TERRITORIAL ISSUES
REGIONAL CONFLICT
OIL NATURAL GAS SHIPPING
TABLES MAPS
August 1998
South China Sea Region
The South China Sea region is the world's second busiest international sea lane.
More than half of the world's supertanker traffic passes through the region's waters. In
addition, the South China Sea region contains oil and gas resources strategically located
near large energy-consuming countries.
The South China Sea encompasses a portion of the Pacific Ocean
stretching roughly from Singapore and the Strait of Malacca in the southwest, to the
Strait of Taiwan (between Taiwan and China) in the northeast (see the footnote for a more
precise definition). The area includes more than 200 small islands,
rocks, and reefs, with the majority located in the Paracel and Spratly Island chains. Many
of these islands are partially submerged islets, rocks, and reefs that are little more
than shipping hazards not suitable for habitation; the total land area of the Spratly
Islands is less than 3 square miles. The islands are important, however, for strategic and
political reasons, because ownership claims to them are used to bolster claims to the
surrounding sea and its resources.
The South China Sea is rich in natural resources such as oil and natural gas.
These resources have garnered attention throughout the Asia-Pacific region. Until
recently, East Asia's economic growth rates had been among the highest in the world, and
despite the current economic crisis, economic growth prospects in the long-term remain
among the best in the world. This economic growth will be accompanied by an increasing
demand for energy. Over the next 20 years, oil consumption among developing Asian
countries is expected to rise by 4% annually on average, with about half of this increase
coming from China. If this growth rate is maintained, oil demand for these nations will
reach 25 million barrels per day - more than double current consumption levels -- by 2020.
Almost of all of this additional Asian oil demand, as well as Japan's oil needs, will need to be
imported from the Middle East and Africa, and to pass through the strategic Strait of Malacca into the
South China Sea (Figure 1). Countries in the Asia-Pacific region
depend on seaborne trade to fuel their economic growth, and this has led to the sea's
transformation into one of the world's busiest shipping lanes. Over half of the world's
merchant fleet (by tonnage) sails through the South China Sea every year. The economic
potential and geopolitical importance of the South China Sea region has resulted in
jockeying between the surrounding nations to claim this sea and its resources for
themselves.
SOUTH CHINA SEA TERRITORIAL ISSUES
Competing territorial claims over the South China Sea and its resources are numerous, with
the most contentious revolving around the Spratly Islands and Paracel Islands (Table 1). However, ownership of virtually all of the South China Sea is
contested (Figure 2). The disputed areas often involve oil and gas
resources:
- Indonesia's
ownership of the gas-rich Natuna Island group was undisputed until China released an
official map indicating that the Natunas were in Chinese-claimed waters.
- The Philippines'
Malampaya and Camago natural gas and condensate fields are in Chinese-claimed waters.
- Many of Malaysia's
natural gas fields located offshore Sarawak also fall under the Chinese claim.
- Vietnam and China have overlapping claims to
undeveloped blocks off the Vietnamese coast. A block referred to by the Chinese as Wan'
Bei-21 (WAB-21) west of the Spratly Islands is claimed by the Vietnamese in their blocks
133, 134, and 135. In addition, Vietnam's Dai Hung (Big Bear) oil field is at the boundary
of waters claimed by the Chinese.
- Maritime boundaries in the gas-rich Gulf of Thailand portion of the South China
Sea have not been clearly defined. Several companies have been signed exploration
agreements but have been unable to drill in a disputed zone between Cambodia and Thailand.
Most of these claims are historical, but they are also based
upon internationally accepted principles extending territorial claims offshore onto a
country's continental shelf, as well as the 1982 United Nations Convention on the Law of
the Sea.
UN LAW OF THE SEA
The 1982 convention created a number of guidelines concerning the status of islands, the
continental shelf, enclosed seas, and territorial limits. Three of the most relevant to
the South China Sea are:
- Article 3, which establishes that "every state has the right to establish
the breadth of its territorial sea up to a limit not exceeding 12 nautical miles";
- Articles 55 - 75 define the concept of an Exclusive Economic Zone (EEZ), which is
an area up to 200 nautical miles beyond and adjacent to the territorial sea. The EEZ gives
coastal states "sovereign rights for the purpose of exploring and exploiting,
conserving and managing the natural resources, whether living or non-living, of the waters
superjacent to" (above) "the seabed and of the seabed and its subsoil..."
- Article 121, which states that rocks that cannot sustain human habitation or
economic life of their own shall have no exclusive economic zone or continental shelf.
The establishment of the EEZ created the potential for overlapping claims in
semi-enclosed seas such as the South China Sea. These claims could be extended by any
nation which could establish a settlement on the islands in the region. South China Sea
claimants have clashed as they tried to establish outposts on the islands (mostly
military) in order to be in conformity with Article 121 in pressing their claims.
REGIONAL CONFLICT
Indonesia has taken the leading role in diplomatic initiatives and cooperative agreements
to resolve South China Sea issues, particularly through the ASEAN (Association of
Southeast Asian Nations) forum, which has called for the peaceful arbitration of
territorial claims. ASEAN includes all South China Sea nations except for China and
Taiwan, and has held a number of working groups with China and Taiwan on related issues
that have the potential to foster the cooperation and friendship needed to resolve the
more contentious issues in the region. Indonesia hosted the first of these workshops in
1990.
Military skirmishes have occurred numerous times in the past two
decades (Tables 2 and 3). The most serious occurred in 1976, when
China invaded and captured the Paracel Islands from Vietnam, and in 1988, when Chinese and
Vietnamese navies clashed at Johnson Reef in the Spratly Islands, sinking several
Vietnamese boats and killing over 70 sailors.
OIL
The focus of most attention regarding the South China Sea resources has been on
hydrocarbons in general, and oil in particular. Oil deposits have been found in most of
the littoral (adjacent) countries of the South China Sea. The South China Sea region has
proven oil reserves estimated at about 7.5 billion barrels (Table 4),
and oil production in the region is currently over 1.3 million barrels per day (see Table 5 for comparison to other offshore oil and gas regions). Malaysian
production accounts for about one-half of the region's total. Total South China Sea
production has increased gradually over the past few years, primarily as additional
production from China, Malaysia and Vietnam came online. Statoil's Lufeng Field in China
(southeast of Hong Kong) came onstream in 1997, and oil was discovered in 1997 in
Vietnam's Block 46 (southwest of Vietnam).
The fact that surrounding areas are rich in oil deposits has led
to speculation that the Spratly Islands could be an untapped oil-bearing province located
near some of the world's largest future energy consuming countries. Such speculation has
given the Spratly Islands with great strategic value, and has fueled disputes over
ownership. In fact, there is little evidence outside of Chinese claims to support the
speculation that the region contains extensive oil resources. Because of a lack of
exploratory drilling, there are no proven oil reserve estimates for the Spratly or Paracel
Islands, and no commercial oil or gas has been discovered there.
Optimistic Chinese estimates of the South China Sea region's oil potential,
however, have helped encourage interest in the area. The most optimistic estimate suggests
that potential oil resources (not proved reserves) of the Spratly and Paracel Islands
could be as high as 105 billion barrels of oil, and that the total for the South China Sea
could be as high as 213 billion barrels. A common rule-of-thumb for such frontier areas as
the Spratly Islands Sea is that perhaps 10% of the potential resources can be economically
recovered. Even using this rule, Chinese estimates imply potential production levels for
the Spratly Islands of 1.9 million barrels/day.
China's optimistic view of the South China Sea's hydrocarbon potential is not
shared by most non-Chinese analysts. A 1993/1994 estimate by the U.S. Geological Survey
(USGS), for example, estimated the sum total of discovered reserves and undiscovered
resources in the offshore basins of the South China Sea at 28 billion barrels. The most
optimistic western estimates place total oil resources (not proved reserves) in the
Spratly Islands at 1-2 billion barrels. If all of this were proven to be economically
recoverable, this hypothetically could yield a peak oil production level for the Spratly
Islands of 180,000 - 370,000 barrels per day - the same order of magnitude as current
production levels in Brunei or Vietnam. However, the rule-of-thumb for frontier areas
suggests that the total could be significantly less.
NATURAL GAS
Though sometimes overlooked, natural gas might be the most abundant hydrocarbon
resource in the South China Sea. Most of the hydrocarbon fields explored in the South
China Sea regions of Brunei, Indonesia, Malaysia, Thailand, Vietnam, and the Philippines
contain natural gas, not oil. Estimates by the USGS and others indicate that about 60%
-70% of the region's hydrocarbon resources are gas. Meanwhile, natural gas usage in the
region is projected to grow by 5% per year over the next two decades, faster than any
other fuel, reaching as much as 20 trillion cubic feet (Tcf) per year. Gas consumption
could increase even faster if additional infrastructure is built. Proposals have been made
to link the gas producing and consuming regions of the Pacific Rim region of Asia by
pipeline, with the South China Sea geographically central to these regions.
Malaysia is not only the biggest oil producer in the region, it
is also the dominant natural gas producer as well, and until recently has been the primary
source of growth in regional gas production. The development of natural gas resources
outside of Malaysia has been hampered by the lack of infrastructure. Despite this
constraint, natural gas exploration activity elsewhere in the region had been increasing
until the ongoing East Asian
economic crisis. Much of this new activity had occurred in the Gulf of Thailand in
waters claimed by Cambodia, where five companies signed conditional exploration
agreements, and in Thailand. In addition, China had accelerated development of its
offshore fields such as Yacheng, Indonesia had discovered the giant Natuna gas field, the
Malaysian Lawit field had come onstream in June 1997, and Vietnam had made a series of
discoveries in the Nam Con Son basin southeast of Vietnam that were expected to
significantly increase its reserves.
As with oil, estimates of the South China Sea's natural gas resources vary
widely. One Chinese report estimates that there are 225 billion barrels oil equivalent of
hydrocarbons in the Spratly Islands alone. If 70% of these hydrocarbons are gas, total gas
resources (as opposed to proved reserves) would be almost 900 Tcf. If the rule-of-thumb
for frontier areas were applied to these resource levels, the Chinese estimates would
imply potential production levels for the Spratly Islands of almost 1.8 Tcf annually.
Another Chinese report estimates that the entire South China Sea
contains more than 2,000 Tcf of natural gas resources. By contrast, the most optimistic
non-Chinese report has estimated total gas resources in the Spratly Islands at 24 Tcf. If
all of this were proven to be economically recoverable, this hypothetically could yield a
peak natural gas production level for the Spratly Islands of 0.5 Tcf annually - the same
order of magnitude as current production levels in Thailand. As was the case with oil, the
rule-of-thumb for frontier areas suggests that the total could be significantly less. The
USGS has placed the sum total of discovered reserves and undiscovered resources in the
offshore basins of the South China Sea at 266 Tcf.
SHIPPING
More than half of the world's annual merchant fleet tonnage passes through the
Straits of Malacca, Sunda, and Lombok, with the majority continuing on into the South
China Sea (Figure 1). Tanker traffic through the Strait of Malacca
leading into the South China Sea is more than three times greater than Suez Canal traffic,
and well over five times more than the Panama Canal. Virtually all shipping that passes
through the Malacca and Sunda Straits must pass near the Spratly Islands. The large volume
of shipping in the South China Sea/Strait of Malacca littoral has created opportunities
for attacks on merchant shipping; in 1995, almost half of the world's reported cases of
piracy occurred in this area.
Shipping (by tonnage) in the South China Sea is dominated by raw
materials en route to East Asian countries. Tonnage via Malacca and the Spratly Islands is
dominated by liquid bulk such as crude oil and liquefied natural gas (LNG), with dry bulk
(mostly coal and iron ore) in second place. Nearly two-thirds of the tonnage passing
through the Strait of Malacca, and half of the volume passing the Spratly Islands, is
crude oil from the Persian Gulf. Oil flows through the Strait of Malacca rose to 8.2
million barrels/day in 1996, and rising Asian oil demand could result in a doubling of
these flows over the next two decades.
LNG shipments through the South China Sea constitute two-thirds
of the world's overall LNG trade. Japan is the recipient of the bulk of these shipments;
in 1996 Japan was dependent upon LNG for over 11% of its total energy supplies. South Korea (over 7% of energy
consumption) and Taiwan (over
4% of energy consumption) also import large amounts of LNG via the South China Sea.
The other major shipping lane in the region uses the Lombok and
Makassar Straits, and continues into the Philippine Sea. Except for north-south traffic
from Australia, it is not used as extensively as the Strait of Malacca and the South China
Sea, since for most voyages it represents a longer voyage by several hundred miles.
Table 1
Territorial claims in the Spratly and Paracel Islands
Country |
Claim |
Brunei |
Does not claim any of the
islands, but claims part of the South China Seas nearest to it as part of its continental
shelf and Exclusive Economic Zone (EEZ). In 1984, Brunei declared an EEZ that includes
Louisa Reef. |
China |
Refers to the Spratly
Islands as the Nansha islands, and claims all of the islands and most of the South China
Sea for historical reasons. These claims are not marked by coordinates or otherwise
clearly defined.
Chinese claims are based on a number of historical events, including
the naval expeditions to the Spratly Islands by the Han Dynasty in 110 AD and the Ming
Dynasty from 1403-1433 AD. Chinese fishermen and merchants have worked the region over
time, and China is using archaeological evidence to bolster its claims of sovereignty.
In the 19th and early 20th century, China
asserted claims to the Spratly and Paracel islands. During World War II, the islands were
claimed by the Japanese. In 1947, China produced a map with 9 undefined dotted lines, and
claimed all of the islands within those lines. A 1992 Chinese law restated its claims in
the region.
China has occupied some of those islands. In 1976, China enforced its
claim upon the Paracel Islands by seizing them from Vietnam. China refers to the Paracel
Islands as the Xisha Islands, and includes them as part of its Hainan Island province. |
Indonesia |
Not a claimant to any of
the Spratly Islands. However, Chinese and Taiwanese claims in the South China Sea extend
into Indonesia's EEZ and continental shelf, including Indonesia's Natuna gas field. |
Malaysia |
Claims are based upon the
continental shelf principle, and have clearly defined coordinates. Malaysia has occupied
three islands that it considers to be within its continental shelf. Malaysia has tried to
build up one atoll by bringing soil from the mainland and has built a hotel. |
Philippines |
Its Spratly claims have
clearly defined coordinates, based both upon the proximity principle as well as on the
explorations of a Philippine explorer in 1956. In 1971, the Philippines officially claimed
8 islands that it refers to as the Kalayaan, partly on the basis of this exploration,
arguing that the islands: 1) were not part of the Spratly Islands; and 2) had not belonged
to anybody and were open to being claimed. In 1972, they were designated as part of
Palawan Province. |
Taiwan |
Taiwan's claims are similar
to those of China, and are based upon the same principles. As with China, Taiwan's claims
are also not clearly defined. |
Vietnam |
Vietnamese claims are based
on history and the continental shelf principle. Vietnam claims the entire Spratly Islands
as an offshore district of the province of Khanh Hoa. Vietnamese claims also cover an
extensive area of the South China Sea, although they are not clearly defined. The
Vietnamese have followed the Chinese example of using archaeological evidence to bolster
sovereignty claims. In the 1930's, France claimed the Spratly and Paracel Islands on
behalf of its then-colony Vietnam.
Vietnam has occupied a number of the Spratly Islands. In addition,
Vietnam claims the Paracel Islands, although they were seized by the Chinese in 1974. |
EEZ = Exclusive Economic Zone
* The South China Sea is defined by the
International Hydrographic Bureau as the body of water stretching in a Southwest to
Northeast direction, whose southern border is 3 degrees South latitude between South
Sumatra and Kalimantan (Karimata Straits), and whose northern border is the Strait of
Taiwan from the northern tip of Taiwan to the Fukien coast of China.
Table 2
Military Clashes in the South China Sea over the Past Two Decades
Date |
Countries |
Military Action |
1976 |
China, Vietnam |
Chinese seize Paracel
Islands from Vietnam |
1988 |
China, Vietnam |
Chinese and Vietnamese
navies clash at Johnson Reef in the Spratly Islands. Several Vietnamese boats are sunk and
over 70 sailors killed. |
1992 |
China, Vietnam |
Vietnam accuses China of
drilling for oil in Vietnamese waters in the Gulf of Tonkin, and accuses China of landing
troops on Da Luc Reef. China seizes almost 20 Vietnamese cargo ships transporting goods
from Hong Kong from June - September. |
1994 |
China, Vietnam |
China and Vietnam have
naval confrontations within Vietnam's internationally recognized territorial waters over
oil exploration blocks 133, 134, and 135. Chinese claim area as part of their Wan' Bei-21
(WAB-21) block. |
1995 |
China, Philippines |
China occupies
Philippine-claimed Mischief Reef. Philippine military evicts the Chinese in March and
destroys Chinese markers. |
1995 |
Taiwan, Vietnam |
Taiwanese artillery fire on
Vietnamese supply ship. |
1996 |
China, Philippines |
In January, three Chinese
vessels engage in a 90-minute gun battle with a Philippine navy gunboat near Campones
Island. |
1997 |
China, Philippines |
The Philippine navy orders
a Chinese speedboat and two fishing boats to leave Scarborough Shoal in April; Philippine
fishermen remove Chinese markers and raise their flag. China sends three warships to
survey Philippine-occupied Panata and Kota Islands |
1998 |
China, Philippines |
In January, the Philippine
navy arrests Chinese fishermen off Scarborough Shoal. |
1998 |
Philippines, Vietnam |
In January, Vietnamese
soldiers fire on a Philippine fishing boat near Tennent (Pigeon) Reef. |
Table 3
Disputes over Drilling and Exploration in the South China Sea
Date |
Countries |
Disputes |
1992 |
China, Vietnam |
China signs a contract with
U.S. firm Crestone in May to explore for oil near the Spratly Islands in an area that
Vietnam says is located on its continental shelf, over 600 miles south of China's Hainan
Island. In September, Vietnam accuses China of drilling for oil in Vietnamese waters in
the Gulf of Tonkin. |
1994 |
China, Vietnam |
Crestone joins with a
Chinese partner to explore China's Wan' Bei-21 (WAB-21 block. Vietnam protests that the
exploration is in Vietnamese waters in their blocks 133, 134, and 135. |
1996 |
China, Vietnam |
Vietnam leases exploration
blocks to U.S. firm Conoco in April. Vietnamese blocks 133 and 134 cover half the zone
leased to Crestone by China. In May, China reaffirms a national law claiming the South
China Sea as its own. |
1997 |
China, Vietnam |
Vietnamese protest after
Chinese Kantan-3 oil rig drills near Spratly Islands in March. The drilling occurrs
offshore Da Nang, in an area Vietnam calls Block 113. The block is located 64 nautical
miles off Chan May cape in Vietnam, and 71 nautical miles off China's Hainan Island. |
Table 4. Oil and Gas in the South China Sea Region
| |
Proven
Oil Reserves (Billion Barrels) |
Proven
Gas Reserves (Trillion Cubic Feet) |
Oil
Production (Barrels/Day) |
Gas
Production (Billion Cubic Feet) |
| Brunei |
1.35 |
14.1 |
145,000 |
340 |
| Cambodia |
0 |
0 |
0 |
0 |
| China* |
1 (est.) |
3.5 |
290,000 |
141 |
| Indonesia* |
0.2 |
29.7 |
46,000 |
0 |
| Malaysia |
3.9 |
79.8 |
645,000 |
1,300 |
| Philippines |
0.2 |
2.7 |
<1,000 |
0 |
| Singapore |
0 |
0 |
0 |
0 |
| Taiwan |
<0.01 |
2.7 |
<1,000 |
30 |
| Thailand |
0.3 |
7.0 |
59,000 |
482 |
| Vietnam |
0.6 |
6.0 |
180,000 |
30 |
| Total |
7.5 (est.) |
145.5 |
1,367,000 |
2323 |
*Only the regions near the South China Sea are included
Proved reserves as of 1/1/98; 1997 production (except Indonesia, where data is as of 1996)
Note: There are no proved reserves for the Spratly and Paracel Islands
Table 5. Oil and Gas in the South China Sea - Comparison
with other Regions
| |
Proven
Oil Reserves (Billion Barrels) |
Proven
Gas Reserves (Trillion Cubic Feet) |
Oil
Production (Barrels/Day) |
Gas
Production (Billion Cubic Feet) |
| Caspian Sea Region |
15.4-29.0 |
236- 337 |
1,000,000 |
2846 |
| Gulf of Mexico (U.S.) |
2.7 |
29.4 |
1,014,000 |
5100 |
| North Sea Region |
16.8 |
156.6 |
6,200,000 |
7981 |
| Persian Gulf |
674.5 |
1718 |
19,226,000 |
5887 |
| South China Sea |
7.5 |
145.5 |
1,367,000 |
2323 |
| West Africa/Gulf of Guinea * |
21.5 |
126.3 |
3,137,000 |
200 (est.) |
*Region stretching from Côte d'Ivoire (Ivory Coast) to Angola
Proved reserves as of 1/1/98; 1997 production (Gulf of Mexico reserves 1/1/97; production
1996)
Figure 1. Supertanker Movements
Source: Center for Naval Analyses and the Institute for National Strategic Studies
Figure 2. Competing Claims in the South China Sea Region
For more information on energy security issues or the South China Sea region,
see these other sources on the EIA web site:
Country Analysis Briefs - East Asia
and South Asia
World Oil Transit Chokepoints
EIA - Energy Supply Security - The
latest information on events that could affect energy security
Links to other U.S. government sites:
- Asia-Pacific Economic Update
The South China Sea
- Piracy and
Attacks on Merchant Shipping in FY 1995
-
Paracel Islands
-
Spratly Islands
The following links are provided solely as a service to our customers, and
therefore should not be construed as advocating or reflecting any position of the Energy
Information Administration (EIA) or the United States Government. In addition, EIA does
not guarantee the content or accuracy of any information presented in linked sites.
The Association of Southeast Asian Nations (ASEAN)
ASEAN Regional Forum (ARF) - from the
Australian Ministry of Foreign Affairs and Trade
Center for Strategic and International
Studies (CSIS) - Security Implications of Conflict in the South China Sea
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