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.