Chinese begin drilling in South China Sea

Chinese offshore oil exploration and development in the South China Sea took another major step, with the Chinese National Offshore Oil Corporation, or Cnooc, announcing it has begun drilling in the waters southeast of Hong Kong.

The official Xinhua News Agency reports that on Wednesday, May 9, Cnooc set up one of its mobile offshore oil rigs around 320 kilometers, nearly 200 miles, off China's shore.

The drilling represents an aggressive move in a standoff between China, Vietnam and the Philippines over who controls the roughly 23 to 30 billion tons of oil and 16 trillion cubic feet of natural gas estimated to sit beneath the sea.

Those amounts would account for around one-third of China's oil and gas resources, but the nation's claim has been strongly contested. Bloomberg reports Philippine authorities have suggested the possibility of allowing Chinese offshore oil exploration while the two countries resolve border disputes, but no such deal has been worked out as of yet.

However, the tone struck by the Chinese was less conciliatory.

"Large deep-water drilling rigs are our mobile national territory and strategic weapon for promoting the development of the country’s offshore oil industry," Wang Yilin, chairman of Cnooc, told Xinhua.

Information on Chinese oil markets can be found at PennEnergy's Research area.

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