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Territorial disputes on E&P in Asia ramps up as China Sea explored

Asia’s state-run NOCs confident search of new oil in international seas erupts tensions over overlapping sovereignty claims in the South China Sea, where maritime borders are not clearly defined and often overlap.

 

SINGAPORE (4 Aug 2011) – Blistering economic growth across Asia over the past few decades has cranked up anxiety levels amongst governments about energy supplies. Asia’s state-run NOCs have become more confident about searching out new oil and gas assets in foreign fields, with such pressure erupting tensions over offshore overlapping sovereignty claims in the South China Sea, where maritime borders are not clearly defined and often overlap.

What’s the status of the disputes in Southeast Asia?
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Since the 1970s, there has been no exploration and production activity in a disputed area between Thailand and Cambodia. Offshore the islands of Borneo, there are potentially huge reserves offshore, but development has been blocked by legal wrangles over sovereignty. In 2002, Brunei awarded Total, BHP Billiton and Amerada Hess a development contract at the disputed Block J area. In 2003, it was reported that a Malaysian patrol boat chased a Total exploration vessel area and Total subsequently halted all offshore work.

Meanwhile, tensions between Bangladesh and Myanmar came to a head in 2008, leading to naval confrontation between the countries. Tension in the area remains high as Petrobangla ramps up its offshore development and recently granted these offshore blocks to ConocoPhillips and Tullow Oil. The recent auctions for the 28 blocks in the Bay of Bengal failed to generate much response, due to lingering fear that more territorial disputes could erupt. With India and Bangladesh issue, further talks are being planned.

Malaysia won the ownership of the Sipidan and Ligitan Islands off Sabah, on the other side of Borneo from the area it disputes with Brunei five years ago with an International Court of Arbitration ruling, but Shell and Chevron are tied up in a wrangle over maritime borders between Indonesia and Malaysia.

China, Vietnam, Taiwan, the Philippines, Malaysia, Indonesia and Brunei claim sovereignty over parts of the South China Sea, believed to contain from 28 billion barrels of oil to as high as 213 billion barrels. Albeit the oil and gas potential of these areas is still in the process of being confirmed, oil exploration and construction work are being taken which faces the potential for more trouble ahead as oil and gas companies expand their exploration work in the contested waters.

In the latest move, an exploration company controlled by Philippine-based Philex Mining Corp plans to drill at least two wells and conduct more seismic surveys starting next year in a natural–gas prospect in the Reed Bank, one of the most-disputed areas in South China Sea. Philex-controlled Forum Energy envisions spending as much as $86 million in the area between now and 2013. “There should be more exploration in the area,” said Philex Chairman Manuel Pangilinan. “My only request to the claimants, and this is the ideal situation, is allow us to do our work.”

Vietnam’s is another contentious situation with its economic growth in recent years has even more stellar than China’s. In 2007, China’s criticism of a deal between Vietnam and BP over Block 5-2, which lies near the Spratlys, caused BP to abandon exploration activities. In July 2008, Vietnam and ExxonMobil signed an exploration contract covering waters off Vietnamese coast, which China claims.

Indeed, it is oil operating companies which suffer the consequences of costly litigation and stalled operations if governments cannot reach a consensus over a disputed boundary, not to mention that it takes many years for disputes to be resolved. Without question, it’s a race. This sea is disputed and whoever can get more of it can get more. All in all, there are probably about 400 undelimited borders estimated globally and Southeast Asia has the most number of disputes pertaining oil and gas reserves and Southeast Asia is home to a number of commercially restraining disputes in E&P due to increased offshore activities.

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With the resurgence of Southeast Asia’s oil and gas industry, we need to ask:

• How do I begin a successful resolution and commercialization of these reserves from straddling boundaries?

• What are the proven strategies to resolve disputes that can be deployed in my specific case?

• Are we equipped to conduct negotiations internationally?

• What would be the role of IOCs to push for the commercial case for a resolution before the exploration and production gets under way?

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The International Boundary Disputes and Unitisation in E&P 2011 Forum (24-25 November 2011, Manila, Philippines) will convene respected IBD professionals to discuss ways of moving a step closer from managing disputes towards expediting the process of commercializing E&P blocks that are within contested areas. They will also discuss how your industry can effectively deal with other complex issues such as sovereignty, unclear delimitation and differing regimes. Visit http://www.arcmediaglobal.com/ibdu for more info.

Be at the congress and benefit from strategies that will enable you to:

• Predict, manage and expedite operations within various contested boundaries of oil and gas reserves

• Strengthen ties with other parties whilst protecting national/company interests through effective negotiations

• Effectively operate in various fiscal and regulatory regimes by drafting a clear and mutually beneficial legal framework for successful JPDA/JDAs

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If you’d like more information about this topic, or to schedule an interview with the speakers at IBDU 2011, please call Eunice Wee at (+65) 6844 2080 or email Eunice at ibdu@arcmediaglobal.com

The Center for Energy Sustainability and Economics (Center for Energy) is an industry research centre (IRC) that works to bring top executives together in communities of learning and practice to act as a catalyst for generating high-value energy business insight and channel top expertise to where the world needs it most. Meetings by the Center for Energy are managed by Arc Media Global, the world’s first B2B/G2B integrated marketing specialist headquartered in Singapore.

Robinson Road P.O. Box 176, Singapore 900326

Contact: Eunice Wee
Arc Media Global
(+65) 6844 2080
ibdu@arcmediaglobal.com
www.arcmediaglobal.com/ibdu

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