Oil and gas in the Capitals

In January 2021, Beijing published a domestic law, allowing it to use force to impose its will on the South China Sea (SCS): The Coast Guard Law of the People’s Republic of China. The law also provides for extending reach beyond Beijing’s territorial claims on the SCS, designated by its “nine-dashed line.” The latter increases risk for all E&P operations in offshore ASEAN.

Thumbing its nose. Beijing’s new law allows the Chinese Coast Guard (CCG), and any supporting vessel, to conduct all manners of law enforcement, interdiction, inspections and pursuits to maintain Beijing’s control of the SCS. “Forcible expulsion,” “towing,” and “detention” are promiment themes. Violations of this law, says Beijing, are to be settled under Chinese legal jurisdiction—read, in a Chinese courtroom.

China says it reserves the right to use weaponry to halt illegal activities, if verbal commands fail. These illegal activities include foreigners engaged in fishing, building structures on reefs, smuggling, trespassing, maintaining a “fixed or floating device of any kind,” and mining. The last four apply to E&P.

Through this law, China has, law enforcement-wise, annexed the SCS, which negates the United Nations Convention on the Law of the Sea (UNCLOS). From Beijing’s perspective, it can now legally ignore SCS exclusive economic zones, freedom of navigation (FON), and Permanent Court of Arbitration rulings. Energy companies and governments operating in maritime ASEAN can no longer leverage UNCLOS from the Chinese perspective.

China extending this law beyond the nine-dashed line comes from the law’s “Chapter IV: Maritime Administrative Law Enforcement, Article 25.” It says Beijing “…may delimit a temporary maritime warning zone in the waters under the jurisdiction of China” in support of any of the previously stated missions or “other circumstances that require the delimitation of a temporary maritime warning zone.” This opens many scenarios, where the CCG might move against E&P operations outside the nine-dashed line.

Assets as weapons. First, however, it is critical to point out that while E&P platforms and vessels are not militarized, they can be, as the 1987 Arabian Gulf Tanker War demonstrates. If armed with missiles and mines, or used as combat support assets, they can prove deadly to commercial and naval vessels. Beijing well understands the concept of militarizing commercial vessels, evidenced by its own massive Maritime Militia fleet, which it has used in the SCS.

In case of hostilities in or near ASEAN waters, then, Beijing will want to clear out all potential threats and “maritime clutter.” This is a military necessity called “sea and air control.” For example, in WW II, before U.S. Marines assaulted Iwo Jima, the U.S. Navy attacked nearby Imperial Japanese ships and aircraft to prevent them from attacking the Marines’ ship-to-shore movement and combat ashore. The same concept applies to China and the SCS. In the event of hostilities, Beijing will aim to keep all possible threats from its claimed SCS territory.

Additionally, Beijing already has harassed foreign E&P activities in the SCS, and a national security crisis would allow it to assert greater control over regional hydrocarbons. For example, if Chinese and Vietnamese vessels exchange fire within or even near nine-dashed line disputed waters, Beijing is likely to apply delimitation to any neighboring body of water to assert sea and air control.

If a blockade or war broke out over Taiwan, Beijing would, likewise, aim to achieve as much sea and air control as possible to protect its naval operations. This would extend to the SCS, to cover any southern maritime avenues of approach to Taiwan.

The same thing applies to war scenarios in Korea. Beijing would enact a massive coastal and maritime security operation to protect Bohai Bay, its most productive offshore E&P area, and waters surrounding Bohai Bay for hundreds of miles, including maritime avenues of approach to Bohai. These latter waters would likely include the northern reaches of the SCS (over 900 mi from Bohai) and possibly its southern reaches.

Similarly, military disputes with Japan might also trigger enhanced CCG operations, including delimitation in the SCS. In all cases, delimitation will impact all offshore ASEAN E&P.

Additionally, Beijing could use delimitation in any friction scenario, short of war, to harass, expel, seize or damage E&P vessels outside the nine-dashed line. These could include gas or oil disputes, where Beijing deems foreign drilling is taking its share of any given basin—the Song Hong basin off Vietnam, for example—not unlike when Iraq’s Saddam Hussain accused Kuwait of slant drilling in early 1990, which became Saddam’s main excuse for war.

Beijing also might apply delimitation to deter foreign military FON operations or commercial seismic surveys in the SCS. Finally, any actions contrary to Beijing’s new law could cause it to force ASEAN countries to redraw their offshore blocks that overlap Chinese jurisdiction.

Considering such threat warnings, regional offshore E&P companies should create crisis management plans, secure appropriate insurance, and prepare legally to deal with losses in personnel, vessels, equipment and revenues.

 circumstances”—ignoring these perils and then declaring a force majeure in the face of disaster might be an inadequate legal strategy. In any case, in the SCS, we’re past China’s verbal territorial bluster and now in Beijing’s legal and law enforcement territory—a significant escalation in regional tensions.

About the Authors

Jeff Moore

Contributing Editor

Jeff Moore runs Muir Analytics, a risk consulting firm specializing in deciphering threats in conflict zones. He is author of the book, Spies for Nimitz, which depicts America’s first modern intelligence agency. He holds a PhD from the University of Exeter in the UK.