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Korea, China, Japan in race over continental shelves

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Published : 2012-07-10 19:56
Updated : 2012-07-10 19:56

Three neighbors jockeying for control of huge oil, gas, mineral reserves in East China Sea


The East China Sea has been contested for decades by South Korea, China and Japan, all seeking to tap huge oil, gas and mineral reserves believed be buried under the seabed.

With their extended continental shelves overlapping in the northeastern part of the ocean, the Asian powers are laying formal claims with a U.N. body in charge of sea shelf carve-up.

The three-way jousting recently took a twist. Seoul and Beijing are working on a joint submission to counter Tokyo’s increasingly aggressive push in maritime issues.

The unlikely alliance with China could mark a turnaround for Korea, which has lacked assertiveness against its powerful neighbors.

But experts say defending maritime interests is still an uphill battle for Korea, which is far behind in terms of scientific data, diplomatic prowess and domestic legislation.

With inland resources depleting at a brisk clip, a surging number of countries have turned to the ocean, which covers more than 70 percent of the planet’s surface.

More than 1.6 trillion barrels of crude, or about 32.5 percent of the world’s reserves, are thought to be buried under the ocean floor, according to Samsung Economic Research Institute.

Driven by their ever-growing thirst for energy, the three Asian powers are excavating seabed minerals at home or abroad, cultivating the latest exploration and extraction technologies and stocking up on related equipment.

“The skyrocketing resources consumption across the region and stiffening competition in the international commodity market have prompted Korea, China and Japan to reinforce strategies to develop wells in their waters. This trend interlocks with the sea shelf boundary issue, generating a conflict factor,” Lee Dal-seok, head of energy policy research at the state-run Korea Energy Economics Institute

“Any potential discord Korea may face while pursuing submarine oilfields originates from intense competition for energy in East Asia,” Lee said.

Flashpoint

The East China Sea has become a flashpoint chiefly due to its treasure trove of crude oil and natural gas that came to light after a U.N. survey in 1968.

It is an enclosed sea covering part of the West Sea, South Sea and western Pacific. Only small portions of its ocean floor are being developed at present.

Tensions remain high because much of the projected reserves overlap in the continental shelves of Korea, China and Japan, which each have a breadth of less than 400 nautical miles, said Chung Gaap-yong, a law professor at Youngsan University in Yangsan, South Gyeongsang Province.

“If you draw lines along the 200 nautical mile borders of the three countries’ economic zones, you’ll see them overlap each other because most sections of the sea do not exceed 400 nautical miles in width,” said Chung, who also heads the Korea Dokdo & Marine Territory Research Center, an affiliate of the state-run Korea Maritime Institute. 

Epitomizing the fiery rivalry, Japan in May falsely announced that the United Nations Commission on the Limits of the Continental Shelf had recognized around 310,000 square kilometers as its continental shelf with a cluster of reefs called Okinotori being a reference point.

The assertion, which dates back to 1931, is aimed at securing access to an extra EEZ and the underlying seabed surrounding the rocks, some 1,740 kilometers south of Tokyo.

Seoul and Beijing dismissed the declaration, billing it an “unfounded bid to amplify maritime profits.”

“If Okinotori is granted island status, everyone who has tiny rocks out there would claim control of the adjacent waters. That could create moral hazard by setting a bad precedent,” an official at the Foreign Ministry told journalists after the news report.

Okinotori is only about 70 centimeters above sea level and has little strategic value. But should it be acknowledged as an island, Japan could maintain rights over 430,000 square kilometers of the waters and a wider range of sea shelf. That is even bigger than its total land area.

The outer limit of an EEZ traditionally does not exceed 200 nautical miles (370 kilometers) from the baselines. But under the U.N. Convention of the Law of the Sea, some 160 coastal member countries can claim control of the underlying seabed beyond that limit by proving the ocean floor naturally extends to its continental shelf.

The U.N. CLCS then reviews the reports and makes a recommendation, establishing a legal ground for the country to exert rights of access to seabed resources within the boundaries. But if other countries raise objections to the claims, it puts it on hold until the stakeholders settle.

“We are not entitled to judicially construe and interpret the members’ documents but to make a recommendation on a scientific basis since we are a group of scientists,” said Park Yong-ahn, a professor emeritus of oceanography at Seoul National University who has been serving the U.N. CLCS since 1997.

Trilateral dynamics

In 1970, Seoul enacted the Submarine Mineral Resources Development Act to expedite seabed development by designating seven mining fields in its waters.

Tokyo’s resistance ensued, leading to a 1974 deal for a “joint development zone” of some 82,000 square kilometers in the seventh block south of Jeju Island. China strongly protested, claiming sovereignty.

The partnership has since produced little, if anything, largely because of a stark difference in the two countries’ interests. The Korea National Oil Corp.’s efforts in 2008 for standalone drilling ran up against opposition by the Foreign Ministry, which was concerned about damaging ties with the powerful neighbor.

Japan later teamed up with China to foster a separate joint development zone in the East China Sea, but it has so far shown little outcome.

“We can be more aggressive rather than keep a low profile for the sake of preventing disputes. The area has long ago become subject to international conflicts,” said Kang Hyo-baik, vice dean of the Graduate School of International Legal Affairs at Kyung Hee University in Seoul.

The trilateral dynamic is seemingly taking a new turn as Seoul and Beijing look to file a common claim to the U.N. CLCS in a bid to counter Japan’s growing assertiveness.

The two countries have been drawing up formal documents, a follow-up to their respective preliminary reports in May 2009. Both of them argue that their continental shelves stretch to the Okinawa Trough in the East China Sea.

“At a meeting early this year, the Chinese officials said they agreed in principle to Korea’s proposal for a joint report to better cope with Japan. But they suggested the two countries submit it at different times ― Korea this year and China next,” a source close to the matter told The Korea Herald on condition of anonymity.

The two-way efforts reflect an ongoing series of territorial claims by Japan. The country has locked horns with China over the Senkaku Islands in the East China Sea and has for decades insisted on control over the Korean eastern islets of Dokdo.

But the alliance remains brittle given China’s juxtaposed claim over Korea’s southernmost island of Ieodo, which lies in the overlapping section of the two nations’ EEZs. Seoul and Beijing themselves were entangled in a spat after the initial report in 2009.

Tokyo also claims the trough, believed to contain vast oil and gas reserves. Japan’s Chief Cabinet Secretary Osamu Fujimura voiced opposition last week after Seoul said it plans to turn in the report later this year.

Treasure trove

The world’s first offshore oil well was detected in 1878 in the Caspian Sea. But it was only about 60 years later that the full-fledged maiden extraction was undertaken by the U.S. in the Gulf of Mexico.

An oil shock in the 1970s then kicked development into high gear. Robust industrial developments in emerging markets in recent years further triggered an imbalance between supply and demand for commodities, resulting in price spirals and trade protectionism. Strategically important minerals such as rare earths have also become a source of diplomatic contention.

With the rapid advancement of survey and drilling technologies, many countries and businesses now can go as deep as 3 kilometers below sea level, said Bae Young-il, a senior researcher with the Seoul-based SERI.

“The global race is picking up pace as the U.S. and Japan have recently begun unearthing marine resources in earnest and energy-deficient countries like Korea are accelerating seabed exploration,” he said in a recent report.

The range of commercially feasible seabed resources has also widened from conventional fossil fuels like oil and gas to minerals including copper, manganese, nickel, cobalt and gold, he added.

In particular, seabed gas hydrates dominantly composed of methane are estimated to be sufficient to supply the world’s population for about 5,000 years. The ice-like substance is found in environments with high pressure and low temperatures such as near continental fault lines, where the gas crystallizes on contact with cold sea water.

Falling behind

Still, Seoul is lagging far behind Beijing and Tokyo in technological expertise, experience and the size of investment in the continental shelf, analysts say. Its lack of a long-term strategy, legal framework, major resources firm and trained workforce are among the other constraints.

“Korea is in urgent need of materializing its marine programs based on a mid- and long-term roadmap,” Bae said.

“It’s predominantly important to obtain base technologies for the promising field of seabed exploration and nurture a pool of highly skilled manpower with expertise in various sectors.”

Park Hwan-il, another researcher at SERI, added that the absence of a global energy giant augments its vulnerability to precarious commodity prices.

“Nurturing resource powerhouses is costly but in the long term it will offset the expenses by curbing raw material budgets and better handling price volatility,” Park said in a recent report.

Armed with its growing financial firepower, China is also rushing to access untapped reserves across the globe. Its state-run enterprises such as Sinopec, CNOOC and PetroChina are rapidly biting into a market long occupied by global giants such as Exxon Mobil, BHP Billiton, Chevron and Petrobras.

Beijing has recently developed a manned submersible capable of operating up to 6 kilometers below the surface. It aims to secure more than 15 ultramodern deepwater exploration vehicles by 2020 and mobilize at least three vessels of 4,000 tons or heavier.

Japan has also been cultivating exploration-related technologies since it launched Japan Oil, Gas, Mineral and Energy Corp, or JOGMEG, in 2004. With top-notch equipment and skills, the state-run specialized firm plans to excavate hydrothermal deposits, cobalt-rich crusts and manganese nodules in its near waters.

It unveiled an ambitious plan in February to dig out natural gas from seafloor deposits of methane hydrates southwest of Tokyo. The world’s first such experiment, worth 10 billion yen ($126 million), will entail its technology used to extract methane from land in Canada in 2008, the government said last year.

Despite the late entry and relatively tiny scale, Korea is pushing into resources mining in home waters and abroad to help stabilize energy supplies and hedge against price swings.

Korea, the world’s fifth-largest crude buyer and the second-largest importer of liquefied natural gas, imports nearly all its energy needs.

KNOC, the state-run oil developer, is currently working with Daewoo International Corp. and STX Energy Co. to haul out natural gas from the bottom of the East Sea.

Daewoo, a POSCO-affiliated trading house, made headlines last year when it discovered three gas pools in Myanmar nearly a decade after it initiated the $4.7 billion project with bleak prospects. The blocks are estimated to hold 4.5 trillion cubic meters of natural gas, equivalent to Korea’s five-year needs.

State-run KOGAS is also taking part in Italy’s Eni S.p.A-led gas drilling program in waters off Mozambique alongside Galp Energia of Portugal and ENH of Mozambique.

In November, Seoul secured an exclusive license to explore almost 3,000 square kilometers of hydrothermal deposits on Fiji’s seabed until 2017. It acquired a similar permit in 2008 in Tonga’s EEZ in the southwestern Pacific.

Legal framework

On the institutional front, experts have long pointed to Korea’s lack of domestic legislation on the continental shelf as a major hurdle to its maritime assertion.

The government promulgated the Exclusive Economic Zone Act in 1996 after signing the U.N. Convention of the Law of the Sea. The act named the 200 nautical mile-section as within its jurisdiction but contains no clause on the subject of the continental shelf.

In contrast, Japan enacted its EEZ and continental shelf laws in 1996, which clarified its dominion over both the EEZ and the seabed underneath. China followed suit in 1998.

“Korea apparently did not insert a separate article in the EEZ law in light of its designation of seven mining districts and relevant pacts with Japan,” Chung at Youngsan University said in a 2004 analysis.

Without seabed legislation in place, Korea would inevitably remain short of a clear legal basis for its claim, Kang at Kyung Hee University added.

“The absence of local law could undermine the country’s position at the negotiating table. When other stakeholders refer to both domestic and international laws, it has no reference whatsoever from home to back its own rights,” he told The Korea Herald.

“Korea gravely lacks awareness of the significance of continental shelves even though it has a maritime territory almost 4.5 times as broad as its land size. It doesn’t have adequate education, institutions and legal grounds.”

By Shin Hyon-hee (heeshin@heraldcorp.com)

Song Sang-ho contributed to this report. ― Ed.

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