Gas dispute deepens neighbourly tensions
Richard Tanter, Spinach7, 5, Summer 2004/05.
One of prime minister's proudest economic achievements has been the signing of a $30 billion deal with china to develop the gorgon natural gas field off the west australian coast. But this huge gas deal is only one part of china's sudden and massive thirst for energy, a need which is also leading to tensions with its neighbour Japan, writes Richard Tanter.
Beneath the shallow East China Sea, north of Taiwan and south of Japan, huge amounts of natural gas have been located, bringing the promise of readily accessible energy supplies for China's rapidly expanding industrial cities like Shanghai. However, the most important new discoveries are leading to serious political tensions between China and its immediate neighbour in the region, Japan.
The 700 sq. kilometre Chunxiao gas field lies between Okinawa and Shanghai in the hydrocarbon-rich Xihu Trough, a north-south plunge in the ocean floor of the continental shelf. China aims to build a 400-km pipeline to deliver more than a billion cubic meters of Chunxiao natural gas a year to Zhejiang province and parts of Shanghai. In 2003, the British-Dutch company Shell and the American Unocal signed a deal with two Chinese companies to develop the Chunxiao field and explore other parts of the Xihu Trough.
However, then the project began to run foul of the messy history and politics of the region. There is no agreed maritime boundary between Japan and China in the East China Sea. According to Japan, the boundary of Japan's exclusive economic zone lies at the so-called "mid-line" between the coast lines of the two countries. This places the Chinese drilling rigs on the Chunxiao field just a few kilometers on the Chinese side of the line - but almost certainly the field extends under the line into what Japan regards as its EEZ. China rejects the Japanese designation of the EEZ border, arguing that the edge of the continental shelf is the true edge of China's maritime territory, hundreds of kilometers east towards the Pacific Ocean. And for good measure, Taiwan agrees with China's refutation of the Japanese position, but says that it has a claim as well.
What would ordinarily be just another commercial dispute about the carve-up of oil revenues is complicated by both history, politics and military concerns. Until recently the Japanese government was loath to press its claims on the boundary too hard - largely because to avoid arousing Chinese bitterness over the 1937-45 Japan-China war. However, under the UN Law of the Sea Convention, maritime boundary disputes of this sort are to be settled once and for all by a process of arbitration by 2009, with a rapidly approaching deadline for China and Japan to make their claims. Moreover, China's thirst for energy has pushed it well ahead of Japan in undertaking detailed geological exploration of the region, and establishing test drilling rigs up and down the whole of its side of the mid-line. This year, China sent geological survey vessels over the mid-line into what Japan regards as its EEZ, from which they were chased out by Japanese Self Defence Forces. SDF P-3C Orion submarine surveillance aircraft almost daily monitor developments on the Chinese side of the line. And the decision to start on the pipeline to the Chinese mainland has triggered almost daily exchanges between diplomats and politicians of the two countries, leading the Japanese Foreign Minister to say that Japan regarded Chinese actions with "grave concern" - diplomat-speak for very serious indeed.
The issue is complicated further by the issue of nationalism on both sides. Japanese chat rooms have wonderful graphics of the Chinese drilling rigs on the Chunxiao field drilling down at an angle under the Japanese side of the mid-line, and undersea pipelines sucking dry Japan's precious natural resources.
The whole issue took a new turn in September when Shell and Unocal unexpectedly announced that they were withdrawing from the Chunxiao just months less than a year before production was scheduled to start. They no longer believed, they said, that the gas could be commercially viable. However, no details of the studies that brought them to this sudden about-face were made available, and the possibility that the heating up of the territorial dispute between China and Japan made the foreigners nervous was on everybody's mind. Both Shell and Unocal are in bad political odour over their association with oil and gas production in Nigeria and Myanmar respectively, where they have been accused of producing hydrocarbon profits at the expense of gross violations of human rights. And Shell is in serious legal and financial trouble over a sudden revision downwards of its world-wide oil and gas reserves - the vital assets of oil major. The last thing either company would need would be involvement in a possibly nasty international dispute.
But even without the western companies' involvement, the Chunxiao field will go ahead, and with it, a deepening of tension between two countries which are not only neighbours, but between them, Australia's number one and two trading partners.