Friday, July 19, 2013


Exclusive: China in $5 billion drive to develop disputed East China Sea gas updated 12/8/2015 /Updated 1/21/20 The debate still continues and drilling has started but still no joint licensing agreement with Japan

(Reuters) - Chinese state-run oil companies hope to develop seven new gas fields in the East China Sea, possibly siphoning gas from the seabed beneath waters claimed by Japan, a move that could further inflame tensions with Tokyo over the disputed area.

 Now this is an extremely rare thought for us because we are four square against China's aggressive moves against the island territories of its neighbors. But in the case at hand China's plan only involves drilling for natural gas, that they badly need, within their own presently internationally recognized Exclusive Economic Zone (EEZ) . The closest announced wells to the EEZ of Japan will be in the vicinity of the islands that China disputes, about 16 miles distant from the presently disputed boundary. Why the concern by Japan? While that's well within China's EEZ, indeed too far in for anyone in the international community to be able to support any military action by Japan to enforce its rights ; its close enough to draw gas out from reservoirs that are partly in presently recognized Japanese waters. China has proposed to Japan the establishment of a joint licensing agency for the area while the boundary dispute is still in progress. Japan has refused such an offer. Japan insists that the boundary dispute be resolved before any licensing in the area begins. China needs the natural gas now, and they can find it within their presently recognized EEZ. They have every right to drill and recover the resource. It is perfectly possible that the formations the Chinese will tap into run under Japanese waters as well. But with no participation by Japan in the licensing arrangements how will they ever see the geological data that the oil producers will eventually have? 

  We see absolutely no legitimacy in China's claims and naval/coast guard activities related to the "First Island Chain" as it relates to the Philippines which China is literally invading.   However, the EEZs of China and Japan do abut.  Whenever that happens regardless of ultimate boundary lines it is important to cooperate with your neighboring coastal states because you will no doubt share subsurface resources but either state can license the access points.  How, except through joint licensing and cooperation may coastal states avoid robbing each other?  On the issue of waiting to settle the boundary cross claims China would be well advised to stop its naval probing and provocation campaign, but Japan should reopen the Chinese proposal for joint mineral leasing / production licensing in the area. Really, on this one issue we see the ball in Japan's court.  Its rough playing with a dragon, but if you want to hold him to compliance with international law, sometimes you do have to play the game.

 While China has no right to conduct the provocative exercises and military intrusions it has done in the region of its dispute with Japan, the Dragon has filed a legal case in a recognized international tribunal.  Now filing and actually having or winning a case are two different things, at least the Dragon has gone through the motions.  The offer of joint leasing/licensing is the only olive branch offered.  The world community hates the idea of war between powerful nation states.  Japan pretty much has to reach for any olive branch offered even when it is reasonable to presume that it will be snatched away at the last moment.  Japan, to enjoy the absolute backing of the U.S. and western allies, must be seen as ruthlessly attacked.

 The dragon appears to be trying to diminish its appearance of ruthless aggression. But by filing their case and keeping the drilling well within their own internationally recognized EEZ they close the options for Japan. Japan can't lease within the same area because the legal dispute scares off investors even if it wasn't so aggressively pursued by China's naval / Coast Guard forces. In short the option of tapping into the probable joint reservoirs isn't open to Japan. The Chinese are drilling 16 miles inside a portion of their EEZ not disputed and unaffected by any judicial decision in the island dispute case. For Japan to tap into the communal reserves she would have to license drilling in a part of her present EEZ that is in fact being litigated. Following the first informal rule of litigation ("every trial is a crap shoot") Japan can't reasonably expect much in the way of bidding. Absent an ongoing joint leasing/licensing authority Japan can't counter this Dragon move to take the rest ,without saying "may I?" to anybody. 

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