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United States
Energy Information Administration


August 1998

South China Sea Region

The South China Sea region is the world's second busiest international sea lane. More than half of the world's supertanker traffic passes through the region's waters. In addition, the South China Sea region contains oil and gas resources strategically located near large energy-consuming countries.

The South China Sea encompasses a portion of the Pacific Ocean stretching roughly from Singapore and the Strait of Malacca in the southwest, to the Strait of Taiwan (between Taiwan and China) in the northeast (see the footnote for a more precise definition). The area includes more than 200 small islands, rocks, and reefs, with the majority located in the Paracel and Spratly Island chains. Many of these islands are partially submerged islets, rocks, and reefs that are little more than shipping hazards not suitable for habitation; the total land area of the Spratly Islands is less than 3 square miles. The islands are important, however, for strategic and political reasons, because ownership claims to them are used to bolster claims to the surrounding sea and its resources.

The South China Sea is rich in natural resources such as oil and natural gas. These resources have garnered attention throughout the Asia-Pacific region. Until recently, East Asia's economic growth rates had been among the highest in the world, and despite the current economic crisis, economic growth prospects in the long-term remain among the best in the world. This economic growth will be accompanied by an increasing demand for energy. Over the next 20 years, oil consumption among developing Asian countries is expected to rise by 4% annually on average, with about half of this increase coming from China. If this growth rate is maintained, oil demand for these nations will reach 25 million barrels per day - more than double current consumption levels -- by 2020.

Almost of all of this additional Asian oil demand, as well as Japan's oil needs, will need to be imported from the Middle East and Africa, and to pass through the strategic Strait of Malacca into the South China Sea (Figure 1). Countries in the Asia-Pacific region depend on seaborne trade to fuel their economic growth, and this has led to the sea's transformation into one of the world's busiest shipping lanes. Over half of the world's merchant fleet (by tonnage) sails through the South China Sea every year. The economic potential and geopolitical importance of the South China Sea region has resulted in jockeying between the surrounding nations to claim this sea and its resources for themselves.

Competing territorial claims over the South China Sea and its resources are numerous, with the most contentious revolving around the Spratly Islands and Paracel Islands (Table 1). However, ownership of virtually all of the South China Sea is contested (Figure 2). The disputed areas often involve oil and gas resources:

  • Indonesia's ownership of the gas-rich Natuna Island group was undisputed until China released an official map indicating that the Natunas were in Chinese-claimed waters.
  • The Philippines' Malampaya and Camago natural gas and condensate fields are in Chinese-claimed waters.
  • Many of Malaysia's natural gas fields located offshore Sarawak also fall under the Chinese claim.
  • Vietnam and China have overlapping claims to undeveloped blocks off the Vietnamese coast. A block referred to by the Chinese as Wan' Bei-21 (WAB-21) west of the Spratly Islands is claimed by the Vietnamese in their blocks 133, 134, and 135. In addition, Vietnam's Dai Hung (Big Bear) oil field is at the boundary of waters claimed by the Chinese.
  • Maritime boundaries in the gas-rich Gulf of Thailand portion of the South China Sea have not been clearly defined. Several companies have been signed exploration agreements but have been unable to drill in a disputed zone between Cambodia and Thailand.

Most of these claims are historical, but they are also based upon internationally accepted principles extending territorial claims offshore onto a country's continental shelf, as well as the 1982 United Nations Convention on the Law of the Sea.

The 1982 convention created a number of guidelines concerning the status of islands, the continental shelf, enclosed seas, and territorial limits. Three of the most relevant to the South China Sea are:

  1. Article 3, which establishes that "every state has the right to establish the breadth of its territorial sea up to a limit not exceeding 12 nautical miles";
  2. Articles 55 - 75 define the concept of an Exclusive Economic Zone (EEZ), which is an area up to 200 nautical miles beyond and adj