China-Taiwan Join Hands to Exploit East China Sea Resources

Publication: China Brief Volume: 8 Issue: 18

Chiang Ping-kun (L) and Chen Yunlin (R)

At the upcoming second meeting between Chen Yunlin, president of China’s Association for Relations Across the Taiwan Strait (ARAT) in charge of handling cross-Strait negotiations, and Chiang Ping-kun, chairman of Taiwan’s Strait Exchange Foundation (SEF), in October, official media in Taiwan and Hong Kong are reporting that the two sides will list cross-Strait joint exploitation of oil and gas resources in the disputed Diaoyutai (Senkaku in Japanese) Islands and Taiwan Strait on the agenda as a priority topic for discussion (United Daily News [Taiwan], August 28; Ta Kung Pao [Hong Kong], September 15). It is expected that at the meeting the two sides will sign a cooperation agreement on jointly executing oil extraction in the East China Sea, particularly regarding the disputed islands claimed by China, Taiwan and Japan (Ta Kung Pao, September 15). Earlier in June, China announced that it had reached a consensus with Japan on the East China Sea issue and invited Japanese investments in an international cooperative development of the Chungxiao (Shirakaba in Japanese) Oil Field in the northern areas of the East China Sea (Xinhua News Agency, June 18).

The reported agreement between China and Taiwan will incorporate the upstream assets of the China National Offshore Oil Corporation (CNOOC) in China and the downstream assets of the Chinese Petroleum Corporation (CPC) in Taiwan. CPC currently operates three oil refineries in Taiwan (Kaohsiung, Taoyuan, and Talin) that are capable of refining 720,000 barrels of crude oil per day (Ta Kung Pao, September 15). According to energy experts, the Diaoyutai Islands waters’ oil reserves are estimated at 74-157 billion barrels (Ta Kung Pao, September 15). The proposed cross-Strait joint exploitation of the Diaoyutai Islands’ oil and gas resources signals the resumption of energy cooperation that was practically frozen during the previous Taiwanese administration in part due to Beijing’s refusal to deal with the pro-Independence-leaning Democratic Progressive Party (DPP). The projects between CNOOC and CPC include a Taiwan-Chaozhou oilfield (the water between Taiwan’s Tainan and China’s Chaozhou) prospecting contract signed in 2002, which was discontinued in 2005, and joint prospecting for oil and gas resources in the Nanri Islands basin in the Taiwan Strait. According to Ta Kung Pao, CPC will set up an office in Beijing while CNOOC and China Petrochemical Corporation will set up offices in Taipei (Ta Kung Pao, September 15).

Disputes over the Diaoyutai Islands’ sovereignty between Taiwan and Japan have escalated since Taiwanese President Ma Ying-jeou came into office in May. The dispute reached a boiling point in mid-June when an accident between a Japanese coast guard vessel and a Taiwanese fishing boat spiraled out of control and led to a chilling stand-off that prompted calls for military action (China Brief, September 3). It is interesting to note that the East China Sea agreement between China and Japan was announced on June 18 shortly after the Taiwan-Japan maritime incident (Xinhua News Agency, June 18). The joint exploration agreement between China and Taiwan over the Diaoyutai Islands, if signed, opens the door for other possible joint ventures between China and Taiwan in oil and gas resources exploration and extraction in other contested regions like in the South China Sea. However, such deals may complicate Taiwan’s relations with its neighbors and allies.