June 2024

Oil and gas in the Capitals

Update on the ASEAN offshore E&P threat picture: Temperature rising
Jeff Moore / Contributing Editor

The temperature keeps rising in the offshore ASEAN (Association of Southeast Asian Nations) region. On May 16, China announced it would arrest “trespassers” in these disputed waters, based on a domestic maritime law it passed in January 2021 (see World Oil, June 2021, "China's new unilateral maritime law impacts all E&P in offshore ASEAN”). On May 24, it deployed the massive 165-m China Coast Guard (CCG) vessel No. 5901 into the West Philippine Sea, possibly to enforce this law. This threat, coupled with other recent incidents, clearly indicates amplified regional E&P risks. 

The Philippines. On Feb. 26, the Philippines Senate passed the Maritime Zones Act, which designates Philippine maritime boundaries according to a 2016 ruling by the Permanent Court of Arbitration in The Hague, which rejected Beijing's territorial claims in the South China Sea. On March 5, Beijing asserted, "China…will never accept any claim or action arising from the award."  

While this was happening, CCG ships and Maritime Militia vessels were busy ramming and firing water cannons at civilian Philippine boats on supply missions to the BRP Sierra Madre, a Philippine military vessel permanently beached on the disputed Second Thomas Shoal. This shoal is close to Malampaya field, facilitating about 40% of Luzon's power needs. In 2027, Malampaya will largely be commercially exhausted, so Manila is looking for other offshore areas to explore. However, China’s actions are forcing it to look into non-disputed waters, limiting the Philippines’ ability to power the nation. 

In late March, U.S. Secretary of State Antony Blinken visited the Philippines to enhance bilateral defense ties, asserting their alliance was "ironclad." Manila is courting U.S. and Indian E&P companies, and in April it took delivery of Indian BrahMos cruise missiles via a 2022 defense contract. This contract underlies a defense coalition between the Philippines, India, Japan and the U.S., meant to bolster the Philippines' defenses. 

Indonesia began offering 10 blocks in 2024 to boost declining domestic production. Five offered in May were: 

  1. Onshore Pesut Mahakam Block, est. 20 MMbbl of oil and 1.1 Tcf of gas.
  2. On/offshore Panai Block, est. 500 Bcf of gas.
  3. Offshore Central Andaman Block, est. 100 MMbbl of oil and 500 Bcf of gas.
  4. Onshore Amanah Block, est. 50 MMbbl of oil and 450 Bcf of gas.
  5. On/offshore Melati Block, est. 850 MMbbl of oil and 4.7 Tcf of gas.

As World Oil reported in April, Indonesia continues to develop Ande-Ande Lumut oil field (AAL) with 101 MMbbl of gross recoverable oil. 

But all is not safe for Indonesian E&P. AAL sits on the outskirts of China's nine-dashed line claim and well within its maritime law claims. All other blocks mentioned here would experience sea and air isolation, should China decide to exercise this law at maximum capacity. What's more, auctions in 2023 for the Natuna D-Alpha Block, with an estimated, mammoth 230 Tcf of gas, attracted no bids, due to Chinese intimidation. Indonesia has rejected Beijing's threats while increasing military activities with the U.S. In April, the aircraft carrier USS Theodore Roosevelt conducted flight operations around Natuna, launching FA-18E Super Hornets “to deter threats that create regional instability…,” said the U.S. Navy. 

Malaysia. In the face of Chinese E&P intimidation, (World Oil, April 2023, "Malaysian PM: Maintain E&P sovereignty, or capitulate to Beijing?"), Malaysia has continued to develop projects that clash with Beijing's maritime claims. One is the twin, deepwater, Rosmari-Marjoram sour gas project off Bintulu. It's expected to produce 800 MMscf of gas per day by 2026. Another is Kasawari gas field in the Luconia Shoals, estimated to contain 3.2 Tcf of gas. Both are offshore Sarawak and critical for Malaysia's economic growth. On May 3, a report from Fitch Solutions company BMI said Malaysia's 2024 national energy policy aimed to push E&P further into deepwater and ultra deepwater, mostly off Sarawak. What’s more, Kuala Lumpur began construction of a new naval base in Bintulu, Sarawak, which is meant to help defend its E&P activities. 

Vietnam. On May 6, PetroVietnam announced two new discoveries. The first is in Rong field, Block 09-1, with an estimated 16.5 MMbbl of oil. The second is in Bunga Aster field, Block PM3 CAA, with a beginning production rate of about 2,100 bopd. The latter is a PSC between Malaysia and Vietnam. It sits on their mutual maritime boundary. In March, Mitsui announced it was investing $560 million to develop the Block B gas project in Kien Giang, which includes a pipeline connected to an onshore power plant.  

These projects fall within range of China’s 2021 Maritime law. For protection, Vietnam has welcomed an Indian Navy visit, signed a security deal with the Philippines, and expanded its shoal fortification-building, mirroring China's tactics. Hanoi has created 330 acres of land on disputed reefs since December 2022, including Barque Canada, South, and Central Reefs. Recent arrests of senior corrupt officials in Hanoi indicate communist hardliners have taken over the government, however; and they might eventually be sympathetic to China and its offshore claims. 

As World Oil has said before, in offshore ASEAN, none of the players are backing down. The opposite is true—all nations are increasing their military activities, and E&P continues, with noted exceptions. The big question now is, what will happen to these projects if an arrest-driven shoving match, or worse, a shooting war, develops? 

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.
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