15 July 2012

Regional Implications for China’s Newest Oil Rig

Zach Dubel, Regional Implications For China’s Newest Oil Rig,” Stimson Center, 2 July 2012.

The May 9th launch of a new oil rig by the Chinese National Offshore Oil Corporation (CNOOC) is a fresh cause of concern among observers of the South China Sea. Some believe that China will attempt to exploit this development to independently mine seabed resources in disputed areas, and the surprisingly nationalistic language employed by CNOOC to describe the drilling rig does little to assuage that fear. For example, CNOOC Chairman Wang Yilin has used phrases such as “mobile sovereign territory” and “strategic instrument” to describe its role within the South China Sea. … 

The new Chinese drilling rig is called the Haiyang Shiyou 981 (HYSY 981). It grants China the indigenous ability to drill in deep-water conditions up to depths of 3,000 meters for the first time.  Accompanying the launch of HYSY 981 was HYSY 201, China’s first deep-water pipe-laying ship. Together, these two vessels represent a landmark achievement and technological hurdle that had previously left China dependent on the expertise of foreign oil companies for offshore resource extraction deeper than a few hundred meters.

Unquestionably, CNOOC and other state-owned companies can play a role as instruments of the state itself if need be, but some analysts view it as telling that CNOOC chose to deploy HYSY 981 and HYSY 201 to the Liwan fields area, an offshore block well within the boundaries of what would be Chinas 200 nautical mile Exclusive Economic Zone (EEZ), rather than the Spratly Islands area. Some in China had publicly anticipated sending the rig to this disputed area a year prior during the testing phase of HYSY 981, and several of China’s neighbors feared it would make good on that threat, but it never came to be. As an April 3rd article from China SignPost argued:

“Although China’s sovereign deep-water drilling capabilities are set to rise, we believe Beijing will exercise restraint in unilaterally exploiting energy resources further than 200 nautical miles from the Chinese coast. Even the benefits of a large new oil or gas field would not outweigh the negative implications of catalyzing more formal anti-China regional security alignments.” …

For the article quoted here, see Gabe Collins and Andrew Erickson, “China Aims to More Than Triple Its Oil & Gas Production in the South China Sea over the Next 10 years,” China SignPost™ (洞察中国), No. 31 (3 April 2011).

Related article: Gabe Collins and Andrew Erickson, “Like it or Not: State Oil Company Becomes ‘Flag’ in South China Sea,” China Real Time Report (中国实时报), Wall Street Journal, 7 June 2012.