The territorial dispute surrounding the Spratly Islands which sit on blocks of potentially rich oil and gas resources has reached a boiling point, as recent watershed developments in a ministerial conference of Southeast Asian nations demonstrated.
The 45th ASEAN Ministerial Meeting (AMM) in Cambodia that kicked off on July 9 this year, will be remembered as the first ever meeting that did not issue the customary joint statement at the end of the summit since the annual event's establishment in 1967. The diplomatic failure resulted as the summit's chair, Cambodia, refused to include several paragraphs in the draft statement that highlighted recent run-ins at the Scarborough Shoal, which is part of the Spratlys. The Philippines and Vietnam rallied their regional neighbors to push for those inclusions, which references incidents involving their ships and Chinese vessels, but Cambodia argued that such mention of bilateral disputes was not appropriate for the communiqu.
In recent years, Phnom Penh has swung towards a pro-Beijing stance, with Cambodia's economy increasingly tied to China's, The Straits Times reported on July 16, 2012. In 2011, Cambodia received $1.2 billion in foreign direct investment (FDI) from China, more than double the combined FDI from its Association of Southeast Asian Nations (ASEAN) neighbors.
After the summit, Vietnam issued a strongly-worded statement on the website of its Ministry of Foreign Affairs on July 13, 2012. "Chinese fishermen's activities around the Spratly archipelago are illegal and violate Vietnam's sovereignty," the statement read.
The Philippines issued a statement the following day stating that it "deplores the non-issuance of a joint communiqu."
Malaysia followed up with its own statement on July 17, 2012, stating that it had "tried very hard to work towards reaching a compromised language on the South China Sea issue but member states were not able to reach a consensus."
The recent rancor surrounding this territorial dispute brings to light far-reaching implications for the oil and gas industry. The issues of which state-backed companies one should work with and which projects one should pursue in the South China Sea are fast becoming problems, and hurdles, which oil and gas companies will find themselves grappling with.
The Spratly Islands are a group of hundreds of small islands, reefs and atolls sited in the South China Sea occupying an area roughly the size of California, but have a combined land area of less than two square miles.
So what prize could this inhospitable archipelago offer that several nations find themselves embroiled in the ongoing maritime tussle? Oil and natural gas.
The archipelago has seen much contention primarily because its location in the South China Sea straddles vast blocks of potential oil and natural gas reserves. According to a published paper in 1997 by the American University Washington D.C, oil and natural gas reserves in the contested waters surrounding the Spratly Islands were estimated at 17.7 billion tonnes. In comparison, Kuwait's oil and natural gas reserves amount to some 13 billion tonnes. However, as of now, there has been no commercial oil and gas exploration and appraisal activities to reaffirm such offsite estimates, data from the Central Intelligence Agency's World Factbook updated on June 30, 2012 states.
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