Beijing to explore South China Sea for natural gas

Energy plan raises possibility of spat with neighbours over sea claims

BEIJING - China aims to produce 15 billion cubic metres of natural gas a year from the South China Sea by 2015, the energy administration has said, raising the possibility of disputes with its neighbours over overlapping claims in the sea.

The National Energy Administration (NEA) said in its 2011- 2015 plan that the South China Sea would "form the main part" of China's offshore gas exploration plans. But it did not specify which parts of the sea it intended to exploit for gas.

China is in dispute with several of its neighbours over claims to parts of the oil and gas-rich sea, including the Philippines, Taiwan, Vietnam, Brunei and Malaysia. China lays claim to almost the whole of the sea.

The NEA said China's total offshore output was expected to reach 20 billion cubic m by 2015, with 15 billion cubic m from the South China Sea. Total national production is expected to be 176 billion cubic m by 2015.

With consumption expected to reach 230 billion cubic m by the end of 2015, China would depend on overseas supplies for about 35 per cent of its needs, up from 15 per cent in 2010, the NEA said.

"This will bring new challenges to the country's energy security, and it must do its utmost to boost effective domestic supplies while at the same time, optimising the natural gas consumption mix," it said.

The NEA also said the 2011-2015 period would be used to "lay the foundations" for the large-scale development of the shale gas sector over the following five-year period.

CNOOC, China's biggest offshore oil producer, said in August that it was inviting foreign companies to explore for oil and gas in 22 blocks in the South China Sea region. None of these was believed to be in disputed territory.

CNOOC, which is driving exploration and production in the South China Sea, revealed last month that it had found a "big" gas field in the sea's Yinggehai basin, which it is now evaluating.

In a separate development, China yesterday branded a US-Japan security treaty "a product of the Cold War", after Washington reaffirmed last week its commitment to Tokyo in its territorial dispute with Beijing over the Senkaku Islands, which the Chinese call Diaoyu, in the East China Sea.

"The Chinese side expresses serious concern and firm opposition to the US Senate's amendment to the National Defence Authorisation Act which involves Diaoyu Island and its affiliated islets," Chinese Foreign Ministry spokesman Hong Lei told reporters.

REUTERS, BLOOMBERG