The oil corporation is listed on the Hong Kong stock exchange, but a state-owned parent company in Beijing holds a majority of its shares — and makes all key decisions. This adds a layer of hidden calculation to what, in companies driven only by the bottom line, would be a straightforward and relatively predictable business agenda.
When CNOOC took delivery of the new high-tech rig in May, Sabban took fright at Chinese reports that it would start work at an unspecified location in the South China Sea. With only a handful of aging vessels under his command but determined to block any drilling in Philippine-claimed waters, he came up with an unorthodox battle plan: He asked Filipino fishermen to be ready to use their boats to block the mammoth rig should it show up off the coast of Palawan, a Philippine island from whose capital, Puerto Princesa, the lieutenant general runs Western Command.
China’s onshore oil resources have been heavily tapped since the 1960s. An expected decline in output is prompting offshore exploration and production in other locations, including the South China Sea.
“We can’t stand up to the military power of China, but we can still resist,” said Sabban, who trained with the U.S. Marine Corps at Quantico, got a master’s degree at the Naval War College in Rhode Island and, with help from U.S. troops, battled Islamic rebels in the Philippines’ unruly south. “We have to send a message that we will defend our territory,” said Sabban, noting that parts of the Spratly Islands — which the Philippines calls Kalayaan, or freedom — lie just over 100 miles from here, and more than 1,000 miles from China.
Negotiating a settlement
CNOOC declined to comment on the whereabouts of its drilling platform — which allows China to drill in much deeper waters than before — and reconnaissance flights by the Philippines military have not yet picked up any sign of it. On a recent visit to Beijing, Philippine President Benigno Aquino and Chinese Communist Party leader Hu Jintao pledged to settle their nations’ rival claims peacefully through negotiation, though they remained far apart on who exactly should negotiate: Beijing wants to talk separately with each claimant; Manila and other smaller nations favor a regional settlement.
And nobody yet really knows the true extent of the hydrocarbon wealth they would be negotiating over. In the absence of detailed surveys, estimates vary widely, though even a low-ball figure by the U.S. Geological Survey estimates that the South China Sea could contain nearly twice China’s known reserves of oil and plenty of gas, too.
China’s own estimates are many times higher. In January, the Ministry of Land and Resources in Beijing told the People’s Daily, the Party’s official organ, that Chinese geologists had found 38 oil and gas fields under the South China Sea and would start exploiting them this year. The ministry declined to elaborate or make officials available for interviews.
During the past year, China has grown increasingly assertive in its maritime claims, which collide with those of not only the Philippines but also Vietnam, Malaysia, Taiwan and Brunei, and in a dispute with Japan over islands in the East China Sea, which also lie near oil and gas deposits.