Energy breakthrough in the South China Sea?

Source: Energy International Agency, 2013.

In early June 2020, China installed an ultradeep-water submarine pipeline 1.542 metre down, to complete the first development well in the Lingshui 17-2 gas field, 150 km south of Hainan Island. The exploration drilling platform, Bluewhale 1, is the world’s largest such platform. Constructed by China International Marine Containers (CIMC), Blue Whale 1 has an operating depth of 3.658 m, can drill 15.240 m into the earth’s crust, and is suitable for deep-sea operation across the world.

The Chinese state media were jubilant; with a Global Times headline on the 1^st of June “China makes breakthrough in deep water gas field exploitation in South China Sea”. Lingshui 17-2 represents various breakthroughs; as the first ultradeep-water discovery made in the region, the first deep water field established by a Chinese company, and the first time China has constructed such ultra-deep pipelines.

The State Council’s official message on the 17th of June was that “by mastering the technology, China has a better marine resource development capacity. The technology also plays a big part in guaranteeing national energy security and supporting the national ocean strategy”.

Lingshui 17-2’s development reflects China’s move away from dependence on Western technology. Initial cooperative exploration with non-Chinese companies ran from 2002-2012; but, as the initial discovered reserves were small, outside partners gave up their exploration equities. Perseverance by the China National Offshore Oil Corporation (CNOOC) then revealed high oil and gas flows in 2014. Drilling started in December 2019.

Trillions of cubic meters of exploitable gas reserves are estimated for the Lingshui 17-2 field. Lingshui 17-2 is expected to be operational by the end of 2021, with an annual gas output of 3-5 billion cubic meters (bcm). CNOOC also expects to add 11 million tonnes of oil equivalent and 10 bcm of natural gas output by 2025, following the development of other deep-water projects at Lingshui 25-1 and Lingshui 18-1.

Context was given in the annual production plan released by the National Energy Administration (NEA) on the 21^st of June, which announced an expansion of China’s domestic production, so as to produce 181 bcm of gas, a rise of 4,3% from the 173,62 bcm of gas produced in 2019. Additional context was provided by the Global Times, on the 15^th of May, by citing CNOOC’s chairman Wang Dongjin saying that the company will make South China Sea the “main battleground” (a rather striking choice of words) for future oil and gas exploration.

The trend is threefold. Firstly, it shows China’s continuing advances as a techno-power. Secondly, it shows China’s ever-increasing need for energy, in which energy security imperatives for China are marked by classic geo-economic needs for access and control of energy resources. Thirdly, it shows China’s increasing presence and capabilities in the South China Sea, not just on the military front but now also on the energy front.