US firms may join China in Oil exploration bids in South China Sea

XOM

Wang Yilin, the chairman of CNOOC, said on 17 July said that some American companies have expressed a willingness to participate in the co-development of 9 blocks of Oil and Gas fields in the South China Sea.

Wang also confirmed that China could complete all deepwater exploration and development independently.

Vietnam Oil and Gas Corporation, the largest state-owned energy company in Vietnam, protested against the development, saying on 26 June that China should cease all exploration of the area, arguing that it belongs to Vietnam. Vietnam has also urged foreign enterprises not to participate in CNOOC's 9 -block co-development plan.

According to a July report which appeared in the China Economic Herald , only companies from the Philippines, Malaysia and Thailand had expressed any interest in the project, with even less interest coming from international oil tycoons, who cited concerns over the South China Sea oil reserves and returns on investments.

However, a researcher from the Energy Research Institute of the National Development and Reform Commission (NDRC) said that the issue of disputed sovereignty was the main reason for current apathy over development. "If China's grip becomes stronger on the South China Sea's sovereignty, we will see more oil companies participating [in development]," the researcher said.

Vietnam has decided to extend the contract with Oil and Natural Gas Corporation (ONGC) for exploration of oil block 128 on July 15. However, India indicated to the Vietnamese authorities its plans to terminate operations in block 128 as it could not begin timely oil explorations due to the hard sea bed. The block is one of CNOOC's nine blocks.

In Y 2006, Vietnam relinquished control to India of disputed blocks 127 and 128, with India relinquishing block 128.

In April this year, India gave up its exploration of block 128. Commenting on the trends, the researcher said: " ONGC's technology wasn't up to standard. Exxon Mobil Corporation's (NYSE:XOM) marine prospecting and exploration technology is very advanced, so there it is possible that CNOOC will cooperate with American companies."

Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.