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Territorial Disputes Hamper Offshore Exploration and Production Efforts in Far East
by Staff Writers
London UK (SPX) Feb 16, 2012

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Efforts of countries in the Asia-Pacific region to boost their offshore exploration and production (E and P) activities and reduce their rising dependency on imported oil and gas will be hindered by territorial disputes, a report by energy intelligence specialist GlobalData has found.

This region witnessed the fastest economic growth in the world over the last decade, largely driven by the rapid industrialization and export-oriented strategies of its two rising stars - India and China. As a consequence, security of energy supply has now become pivotal to sustain this rising energy demand.

"Although China's present energy policy is biased towards oil imports, significant activities in its domestic E and P and the government's plan to promote its shale oil and gas reserves will see a shift in its energy supply balance", notes Jennifer Santos, Head Consultant at GlobalData's Energy Division.

Access to technology and finance has become less of a hindrance to offshore E and P activities compared to the growing territorial disputes between neighboring Asian countries. The most notable is the dispute in oil-rich Spratly Islands in the South China Sea.

Vietnam, China and the Philippines signed an accord in 2005 to safeguard oil and gas activities in the region, but tensions are still brewing among countries that claim ownership to this territory.

"Given the vast amounts of potential oil and gas reserves in South China Sea and its role as a vital shipping route, any territorial disputes will be detrimental to the region's energy security, trade and political stability" , adds Santos.

That the Chinese official media criticized the historic cooperation agreement between state-owned PetroVietnam and Indian corporate ONGC Videsh for joint oil and gas exploration in South China Sea as "reckless and motivated by collecting political bargaining chips against China" portends of the potential adverse impact of territorial disputes on future offshore E and P activities in the region.

China's Global Times warned that it can use its might to disrupt the two companies' exploration activities in the South China Sea. Similar territorial disputes exist between Azerbaijan, Turkmenistan and Iran for their claims on the Caspian Sea.

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