Beijing Opens Bids for Offshore Oil Blocks that Include Areas Disputed by Vietnam and Taiwan

On April 14, the China National Offshore Oil Corporation (CNOOC) opened tenders for 22 offshore oil and gas blocks located in the South China Sea.  Although 16 of these blocks are reportedly in the Pearl River Mouth Basin and out of contested waters, others are reportedly in more sensitive, disputed areas in proximity to Taiwan and Vietnam.

Some of these areas pose significant technical challenges in terms of carrying out successful drilling operations, which likely means they would require the involvement of larger energy companies.  The willingness of such companies to step into contested territory is unknown, but would almost surely expose them to a range of reputational, legal and even physical security risks.  Interestingly, a similar narrative is unfolding in the Exclusive Economic Zone of Ukraine, including Crimea, in the Black Sea.

In the Black Sea, Russia has placed armed guards and weapons onboard their drilling rigs.  There are likewise reports of China placing a military radar on their rigs in the East China Sea.  In the South China Sea, we have also seen China send a flotilla of armed naval vessels to accompany the deployment of drilling rigs into disputed maritime areas offshore Vietnam.

Accordingly, the possibility of additional drilling efforts in or near these disputed areas becoming further militarized is a real escalatory concern that would likely implicate those companies that choose to operate in this environment.