China, Vietnam quarrel over gas rich area
China, Vietnam quarrel over gas rich area
By Neil Fullick
SINGAPORE (Reuter): Natural gas is at the center of a row between China and Vietnam over a Chinese oil rig operating in waters both countries claim, industry analysts said on Wednesday.
The territorial waters the two countries claim overlap to the south and west of China's Hainan island and Beijing has found gas on both sides of the island.
Further recent discoveries by China have raised the exploration potential of the region and that may be the reason Hanoi has suddenly started making a fuss, the analysts said. "They have never raised protests about this area before," said one.
China's Kan Tan III, which analysts said is a semi-submersible oil rig, is operating south of Hainan in waters also claimed by Vietnam.
Just 50 km away is China's Yacheng 13-1 field, discovered in the 1980s. It has confirmed reserves of 3.4 trillion cubic feet of gas, and is operated by Atlantic Richfield Co (ARCO) [ARC.N] of the United States in undisputed waters.
From Yacheng 1-13, a pipeline feeds gas to Hong Kong, bringing international prices, and to the domestic market of Hainan, which has a mixture of industry, agriculture and tourism.
But China has also made smaller discoveries near where its rig is now operating -- called Block 113 by Vietnam -- which it might try to link to the bigger field, the analysts said.
"There is a series of small gas discoveries and there is a pipeline with spare capacity. The discoveries are not big, but as a cluster together they might make commercial sense," one analyst said.
Another said China has drilled three wells within the area defined by Block 113. The first two wells hit gas. The third was dry, he said.
"I should imagine the Chinese are drilling more appraisal wells," he said of the Kan Tan III's current activities.
Last weekend, Vietnam protested against the rig's presence. Hanoi said it had formally protested to Beijing and demanded the rig's immediate withdrawal.
The official Vietnam News Agency said Vietnam's coastguard had cautioned the vessel repeatedly, but said the warnings had been ignored.
Beijing said the vessel was operating in Chinese waters, in a region it calls the Ledong prospect area. Its activities were normal and above reproach, China said.
A source at the China National Offshore Oil Corp (CNOOC), which oversees all of China's offshore exploration and production operations, said the Kan Tan III started drilling on March 8.
He declined to say how long the ship would be in position, but analysts said it would typically take several months for one or two more wells to be completed.
China is also developing the Dong Fang-1 field to the west of Hainan, in an area claimed by Vietnam as well. China says it has confirmed reserves of 2.8 trillion cubic feet.
In 1974, Beijing called it a "hands off" area for Vietnam and aims to pipe the gas to a fertilizer complex on Hainan.