Oil and Gas in the Capitals
Oil or eminent domain? China and the Spratlys
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China’s recent blustering about its ownership of the entire South China Sea was made by many to be about oil and gas. Even China, in the midst of war-drum beating last May, said it was deploying CNOOC’s colossal semi-submersible, Marine Oil 981, to the Spratly Islands, to stake its claim as part of a “2020 Deepwater Daqing” strategy. Well, times change—and quickly, these days. Since that proclamation, CNOOC, the Chinese government’s global offshore spearhead, has hardly mentioned Deepwater Daqing, and CNOOC’s E&P activities as of late, are paying little mind to the Spratlys. So here’s the Chinese E&P view of the issue. Daqing, means “Great Celebration.” It is a northeastern Chinese town in Heilongjiang province,1 famous for producing massive amounts of oil in the 1960s.2 Daqing is heralded in Chinese government lore as a “heroic struggle” of the “Ironman” oil worker against time and impossible weather conditions to produce enough fuel to “save China.” At its peak in 1976, says CNPC, Daqing produced 367 MMbbl of oil a year. Government PR says it was a “miracle”3—all due to the workers’ superhuman efforts and their belief in Mao Zedong’s political philosophy. Daqing has become a word in Chinese symbolizing “biggest,” “best” and “most productive.” And the government has used this motivational imagery on other E&P projects such as Offshore Daqing,4 a series of rigs off the immediate coast of China, mostly in the Bohai Bay area, where Beijing wanted to produce 267 MMbbl equivalent (both gas and oil). And by 2010, it surpassed this goal with 469 MMbbl, earning revenues of RMB 354.8 billion. This was part of CNOOC’s Eleventh Five-year Plan.5 CNOOC asserts this success would not have been possible without 1960s-era Daqing efforts. Well beyond drilling for the thrill of striking big oil, overcoming technical challenges, and making profits as Western energy companies do, CNOOC says Offshore Daqing was about “making [workers’] dreams come true,” being “ironmen” of oil, and securing China’s energy future.6 E&P throughout Offshore Daqing has been, says CNOOC, a “fiery battlefield.”7 The company, moreover, proclaimed it is, “an epic in our history and symbolized a magnificent spiritual monument over the deep blue sea.”8 CNOOC said operating the project was a unique, one-of-a-kind, world historical event by asserting, “China has established a comprehensive offshore oil industry in less than 30 years, while most developed countries took over 100 years.”9 CNOOC declared Offshore Daqing a “great leap forward” for China’s offshore E&P.10 This specific terminology comes from China’s 1958-61 national development under Mao that changed the country from an agricultural to an industrialized state in but a few years’ time. And so it goes with Offshore Daqing. And it says something revealing about CNOOC—it is not just a tool of the Chinese government. It is one of its most valuable de facto national agencies. So, when CNOOC announced its Marine Oil 981 was deploying to the Spratlys in May 2011, in the middle of China’s militant wrangling with Vietnam and the Philippines, it demonstrated not just a show of Chinese might, but Beijing’s E&P intentions, too. This deployment was supposed to be part of CNOOC’s 2020 Deepwater Daqing. And with Deepwater Daqing comes the “biggest.” And “most productive.” And a heroic “great leap forward.” And the destiny of China. And a “fiery battlefield.” But none of this has turned out to be the case, at least for now. CNOOC has backpedalled. It is not leading a charge into the southern South China Sea. And it is no longer tossing around heroic visions of Deepwater Daqing. In fact, the new head of CNOOC, Chairman Wang Yilin, isn’t even using the term, at least not right now. 2020 Deepwater Daqing was supposed to be duplicative of Offshore Daqing with output of 1 MMbopd, but in deep water off China’s coast and in the Spratlys region. However, Reuters recently reported that China does not have enough deepwater E&P capability to produce this amount in ten years—20 might be more realistic. According to the American Bureau of Shipping, China has but one deepwater well among all of its assets, the Liwan 3-1 gas field. It is 350 km off the coast of Hong Kong in the Pearl River Mouth basin, where first production is slated for 2013.11 As for the Spratlys region, Beijing in 2004 allowed PetroChina to conduct seismic surveys there, but no drilling has been reported.12 In August 2011, CNOOC and two other Chinese companies expressed interest in bidding on the Philippines’ blocks off Palawan. This is the Reed Bank area—Recto Bank to the Philippines—under controversy between Manila and Beijing.13 And Sinopec in November 2011 said the Spratlys (Nanshas) were ripe for exploration, signifying Bejing’s intentions.14 Overall, however, that’s been it for recent Chinese involvement in this region. Hardly the big Daqing push. Because of China’s “great leap” mentality, and because it is a de facto dictatorship, it could easily deploy CNOOC or a like company to the Spratlys tomorrow, to begin Deepwater Daqing even though Daqing potential there has yet to be proven. Beijing still believes it owns the entire southern South China Sea. And this is a territorial claim. And it is a face issue—both things worth fighting over. So energy firms still have to worry about Beijing muscling them out of the region over politics, the same brand of politics that drove Daqing, Offshore Daqing and the currently non-existent Deepwater Daqing. LITERATURE CITED |
- X80 heavy wall pipe solutions for deep/ultra-deepwater field developments in mild sour environment (November 2023)
- Wellbore seal control and monitoring enhance deepwater MPD operations (October 2023)
- Novel approaches to deepwater steel catenary production riser life extension benefit ESG (September 2023)
- Advancing casing drilling to deepwater: Rethinking top hole well construction (August 2023)
- Oil States’ Taylor sees pick-up in OFS business in deepwater and international sectors (June 2023)
- Deepwater/Subsea Technology: Harnessing tie-back engineering techniques to accelerate production (March 2023)
