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Offshore Energy Claims Open Divisions In Southeast Asia

Simon Montlake
This article is more than 8 years old.

Join the dots (Image via Wikipedia)

Depending on who you believe, the South China Sea could be the next Persian Gulf due to its untapped oil and gas deposits. It's also a key shipping lane that the US Navy has guarded for decades. That's why so many countries are sparring over remote islands and territorial waters in these waters. The Spratly and Paracel Islands, tiny dots on the map, are claimed by several countries, including China. Since 2009, Beijing has struck a more aggressive tone in staking its claims. The latest row concerns India's state oil company, which is exploring in Vietnamese-claimed waters. State-run Chinese media recently blasted India for meddling in disputed waters and advised it to beat a hasty retreat. Expect more harsh words as Vietnam seems determined to tap its offshore oil fields, as is the Philippines, a close US military ally. A multilateral solution has long eluded Southeast Asia's regional body and appears unworkable in the face of implacable Chinese opposition.

Neither Cambodia nor Thailand are claimants to South China Sea islands. Their offshore energy dispute concerns oil and gas fields in the Gulf of Siam, which lies to the east (left of the map). These fields are the main source of feedstock for Thailand's petrochemical industry. Cambodia has yet to extract any oil from its own shores (extravagant claims notwithstanding). One reason is that its undersea reserves are thought to be fairly modest and foreign oil companies won't bite without a bigger field. That means sorting out sea boundaries with Thailand and negotiating terms of any shared production (as Thailand did with Malaysia). A 2001 agreement between the two countries pointed the way towards a settlement, but fell victim to Thailand's internecine politics and a sporadic border war over a crumbling temple. Oil exploration took a backseat to nationalist rhetoric on both sides.

Since taking office in August, the new Thai government has quickly mended diplomatic relations. It also hopes to get the ball rolling on demarcating boundaries in the Gulf of Siam. Last week, Thailand's Energy Minister struck an alarmist tone, warning that Thailand could run out of gas in 15 years if it didn't resolve its dispute with Cambodia. He told Bloomberg that petrochemical companies would lose billions of dollars if reserves weren't replaced. Thailand also relies on natural gas to generate much of its electricity; Burma is already a major supplier via a Total-run pipeline. But gas piped onshore from the Gulf is better suited to Thailand's petrochemical industry, which is clustered on its eastern coastline that abuts Cambodia. An alternative would be to import liquified natural gas, but that is much more expensive, the minister said.

Such attention by a Thai politician to the needs of industry is laudable. But it may be more about negotiating tactics by Thailand than the risk of a serious energy shortage, according to the Phnom Penh Post, a daily newspaper in Cambodia.

A number of regional analysts said the risk of an oil crisis in Thailand was slim.

“It's not an energy issue, it's a political issue. They wanted to send out a political mess-age: we are ready to solve this problem now,” Pavin Chachavalpongpun, lead researcher for political and strategic affairs at the ASEAN Studies Centre in Singapore, said.

“It's hard for me to believe that we will run out of gas and oil within 15 years,” he said, adding that Thailand relied primarily on oil imported from Myanmar and the Pers-ian Gulf states.

Statistics regarding the energy minister's claims were not available to industry- watchers, he claimed.

Instead, the announcement of a potential energy crisis was a way for Yingluck Shinawatra's government to push forward talks on the OCA, Pavin Chachavalpongpun said....

...Johannes Lund, Southeast Asia analyst at the Singapore consultancy Control Risks, agreed the statement had been politically motivated.

“It was probably more of a jab at the opposition party, because they had let the process stall since 2006. That's five wasted years,” Lund said, adding that the recent dialogue between Thailand and Cambodia was in both countries' best interests and that claims of a potential energy crisis would not disadvantage Thailand in the negotiations.

via Experts question Thai energy crisis declaration | Business | The Phnom Penh Post - Cambodia's Newspaper of Record.

Either way, it's about time that the two countries divided up the offshore spoils. If anything, Cambodia has more at stake because it is wholly reliant on imported fuel and still represents a risky market for oil companies. Thailand has more options, and its jointly-adminstered gas field with Malaysia can probably be expanded. But it also needs to maintain a reliable supply to its downstream industries, so its needs are much greater than Cambodia's. Then there's Burma, which is drawing up plans for its own future petrochemical industry at Dawei, a project awarded to Ital-Thai Development. So the regional demand for gas may increase, along with the protracted jousts that are par for the course in energy politics.


