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Korean Company Announces Oil Discovery in South China Sea

26 February, 2018

A South Korean company has discovered oil in the South China Sea, an area claimed by six governments.

SK Innovation Co. announced last week that it had found crude oil in a Chinese area in the South China Sea.

The case suggests a way in which countries can cooperate in the area. Countries without a territorial claim in the resource-rich sea can agree on contracts with governments that have claims.

Experts say governments normally rent areas of their 370-kilometer-wide exclusive economic zones. They say claims beyond the economic zones are more likely to cause conflict.

Oh Ei Sun teaches international studies at Singapore Nanyang University. He said, "This is not uncommon, but of course whenever there is a discovery, the people would raise their eyebrows..."

Oh added this is especially the case today when claims to areas of the South China Sea have intensified.

Many companies from non-claimant countries involved

Six governments claim parts of the 3.5 million-square-kilometer South China Sea. They are Brunei, China, Malaysia, the Philippines, Taiwan and Vietnam. The disputes have increased partly because of claims to undersea gas and oil.

The U.S. Energy Information Agency estimates that 11 billion barrels of oil and large amounts of natural gas are under the sea.

China claims about 90 percent of the sea. It has built the most landforms in the sea upsetting countries that also have claims.

India and Spain have worked with Vietnam to find undersea oil since 2016. The Philippines worked with U.S.-based Forum Energy to explore for oil in 2012. And in 2014, the oil company Shell and a Malaysian company found natural gas.

In the recent announcement, SK Innovation said it drilled for oil in December and found a supply that, it said, tested up to 3,750 barrels of oil per day. The company said it plans additional wells to find out more about the supply.

The company has been exploring the area since 2015 in partnership with the state-owned China National Offshore Oil Corporation.

Alan Chong is an associate professor at the S. Rajaratnam School of International Studies in Singapore.

He said that countries with South China Sea claims are quietly setting aside politics in an effort to make economic gains. However, the claims and business deals are not simple. "The complexity is just tangled," he said.

South China Sea territorial claims map
South China Sea territorial claims map

A way to spread exploration costs, gains

Most exploration contracts take place when a country offers an area of ocean territory to outside companies. The areas usually are within the country's exclusive economic zone to avoid disputes.

Song Seng Wun is an economist with CIMB bank in Singapore. He said the areas have mostly been in places where there is less risk of conflict. "I think it's pretty straight forward on that side," he said. "It's quite well regulated."

However, disputes over the extent of exclusive economic zones can still lead to disputes.

In 2017, a Spanish company stopped looking for oil in an area controlled by Vietnam, but disputed by China. Political experts said, at the time, that China had pressured Vietnam to stop the project.

However, Oh notes that oil companies that work in the Middle East have experience with political risks. What they fear most is finding no fuel after spending billions of dollars exploring.

I'm Mario Ritter.

Ralph Jennings reported this story for VOA News. Mario Ritter adapted it for VOA Learning English. Hai Do was the editor.


Words in This Story

contract –n. a legal agreement between people, companies or other groups

rent –v. money paid in order to use a property or living place

zones –n. an area set apart from others for special use or treatment

raise their eyebrows –v. idiom to bring attention to

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