If China is right, then there is enough oil under the South China Sea to feed global consumption for several years. But Beijing may be making an aggressive bet on the wrong horse.
Beijing seems to be doubling down in the South China Sea. Why? In large part it’s to secure access to potential deep sea hydrocarbons like oil and natural gas – many describe the South China Sea as the next Persian Gulf, given the possible richness of resources that supposedly lay beneath the seabed. And while there are significant differences between the two regions that complicate such a comparison – including the ease of access to fossil fuel resources and the cost of developing them – it’s a useful analogue for understanding why China views the region as critical to its core interests.
But Beijing may in fact be overestimating the strategic significance of the region’s oil and natural gas – and taking unnecessary risks that could undermine its peaceful rise.
China’s voracious appetite for energy to feed its continued economic development will become increasingly important as the state continues its transition into an industrial powerhouse. In 2009, China just barely overtook the United States as the largest consumer of energy in the world; by 2025, its energy consumption is projected to eclipse the United States by nearly 50 percent. In order to secure access to the energy resources it needs to fuel its economy, Beijing is developing a broad range of energy sources, including investments in solar technology and hydroelectric development. Yet conventional fossil fuels, China is betting, are likely to remain dominant.
As a result, Beijing is developing a robust portfolio of fossil fuel resources from a variety of locations, including the Middle East, Central Asia and the South China Sea, in an effort to reduce its vulnerability from any one source. Middle East oil must transit through the Strait of Malacca, which, as Beijing is acutely aware, poses a strategic vulnerability should any state choose to compromise the sea lines of communications by blocking the strait. Beijing’s investment in a vast infrastructure of overland energy pipelines from Central Asia means oil must cross volatile transit states like Burma and Pakistan and is delivered to western China where Beijing’s influence waxes and wanes. Consequently, Beijing is eying the South China Sea as a safer way to ensure access to the energy its needs to thrive.
Yet Beijing’s plan may be flawed. Estimates vary widely as to the size of the hydrocarbon reserves beneath the sea floor. The U.S. Geological Survey calculates that there may be roughly 28 billion barrels of oil – enough to feed global oil consumption for about 11 months according to 2009 statistics. The Chinese government, meanwhile, estimates that the South China Sea region contains nearly 200 billion barrels of oil, or enough to meet global oil consumption for more than 6.5 years. Analysts tend to agree that China’s estimates are wildly optimistic. These disparate estimates need to be resolved, yet recent efforts to survey fossil fuels reserves by states like Vietnam have been stalled by the China Maritime Safety Administration, which has taken to cutting survey cables of vessels chartered to provide better information.
Moreover, Beijing’s bet that fossil fuels will remain the dominant energy source seems to ignore developments in energy technology and the broader energy market. Indeed, the once-single energy source transportation sector, which accounts for about 60 percent of oil consumption in OECD countries, is now being diversified by electric vehicles as well as serious research and development of second-generation liquid biofuels derived from feedstock like algae that can displace the demand for oil.
However, serious research and development of second-generation liquid biofuels derived from feedstock like algae that can displace the demand for oil. Indeed, the scaling up of alternative fuels will alter the strategic value of whatever resources lie beneath the South China Sea floor as they reach price parity with conventional fossil fuels. Experts contend that if production continues apace, these alternative fuels may be commercially available and at price parity with petroleum in a decade.
Photo Credit: U.S. Navy