For those of us who have worked primarily on American oil and gas rigs, international drilling affairs may appear to be a world away. But recent developments in the South China Sea, the deepest body of water on earth and a rich oilfield, may have lasting implications for international waters.
In May of 2014, coinciding with President Obama’s tour of Asia, China sent a $1 billion rig, the Haiyang Shiyou 981, to drill for oil in disputed waters. Specifically, the dispute centered around the Paracel islands, a chain of more than 30 islands in the Pacific that has historically belonged to China, but over which Vietnam has a small claim.
While the Chinese have controlled the islands since 1974 (after World War II a defeated Japan recognized Chinese sovereignty over the islands), Vietnam claims that it’s had rights to at least three of the islands since before the Vietnam War.
The Vietnamese coast guard sent 30 ships to try and stop the Haiyang Shiyou 981 from starting work in the contested waters. China responded with the deployment of a flotilla, and even water cannoned some of the Vietnamese ships. They then proceeded to set up a three-mile exclusion zone around the rig.
In July, just two months later, China decided to remove the rig, but the message had already been clearly sent: the Chinese, who own 28% of Vietnam’s imports, can drill where they want if they have even a fraction of a claim to the water. Nobody was going to stop them, and especially not one of their most reliant customers.
What does this mean for international deep-sea drilling? We’ll have to wait and see. The South China Sea is the deepest oilfield in the world, and China is just beginning to test its hardware by drilling to half of the Haiyang Shiyou 981’s maximum depth. That it was able to drill where it did means that a larger deployment is perhaps less than a decade away. But more importantly, China’s bullying of Vietnam indicates that it does not feel badly about asserting its claims over economic allies.
The United States is one of China’s biggest customers. They own the majority of our national debt, and we’re only ramping up business with them. And while the U.S. has a significant share of Pacific real estate, China’s actions in Vietnam could suggest a soft-power takeover of drilling prospects in the Pacific given their leverage over the American economy. It might not even be too early to say that one of the easiest ways for the U.S. to pay back China the trillions of dollars it owes them is by giving them some of its Pacific oilfields.
China has, over its 5,000-year history, had little interest in expanding its territory beyond the mainland. All recent disputes (e.g., Tibet, Taiwan, Paracel Islands) have been centered on regions that were at one point under Chinese rule, so the likelihood of an all-out assault on American waters is very unlikely.
Still, that doesn’t mean that the oil industry won’t change immensely once Chinese rigs take to the waters. American supremacy in the Pacific may become a thing of the past once Chinese drilling operations become more firmly entrenched. Also, continued shale drilling fortifies the Chinese as being largely immune to rising and falling oil prices and reserves.