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Exxon, Russia Eye Oil and Gas in Disputed South China Sea

By Steve Horn

President Donald Trump's newly sworn-in Secretary of State, recently retired ExxonMobil CEO Rex Tillerson, turned heads when he expressed support for an aggressive military stance against China's actions in the disputed South China Sea during his Senate committee hearing and in response to questions from Democratic Party Committee members.


Tillerson's views on China and the South China Sea territory appear even more concerning against the backdrop of recently aired comments made by Trump's increasingly powerful chief strategist, Steve Bannon, that the two nations were headed toward war in the next five to 10 years, as reported by the Independent (UK). However, what Tillerson did not reveal in his answers is that Exxon, as well as Russian state-owned companies Gazprom and Rosneft, have been angling to tap into the South China Sea's offshore oil and gas bounty.

WhiteHouse.gov

"We're going to have to send China a clear signal that, first, the island-building stops," Tillerson said at his hearing, speaking of the man-made islands China's military has created in the South China Sea and uses as a military base. "And second, your access to those islands also is not going to be allowed."

Tillerson, who came under fire during his hearing for maintaining close business ties with Russian President Vladimir Putin, was asked for further clarification on what he thinks the U.S. posture toward China should be in one of dozens of questions sent to him by Sen. Ben Cardin (D-MD). In responding, Tillerson spelled out the bellicose stance he believes the U.S. should take toward China, a country Trump has often said should be handled with a metaphorical iron fist.

U.S. Senate Committee on Foreign Relations

Sean Spicer, White House Press Secretary and Communications Director, echoed this in a recent press briefing, stating that, "The U.S. is going to make sure that we protect our interests there."

"It's a question of if those islands are in fact in international waters and not part of China proper, then yeah, we're going to make sure that we defend international territories from being taken over by one country," said Spicer.

While President Barack Obama and Secretary of State Hillary Clinton took a rather hawkish U.S. foreign policy stance toward China known as the Pacific "pivot," these developments under the new administration appear to take tensions with China to a new level.

The Chinese government sees the Trump White House and Tillerson's recent statements, if carried out, as an act of "war" toward the country, which Beijing says would not be allowed to stand unchallenged.

A DeSmog investigation shows that "our interests" (to quote Spicer) overlap suspiciously often with those of ExxonMobil, Gazprom and Rosneft.

South China Sea, Exxon, Gazprom

Exxon's offshore oil and gas ties in the region circle the South China Sea from Vietnam and the Philippines to Indonesia and Malaysia. Gazprom also maintains business ties with Vietnam. While most western oil majors have veered away from tapping into this oil and gas, Exxon has not shied away.

"Unlike other Western oil majors, which have usually taken a wait-and-see approach when drilling in the disputed waters, ExxonMobil appeared unfazed by the political uncertainty in the region and maintained extensive business links with almost every Southeast Asian country," wrote the South China Morning Post.

A leaked 2006 U.S. State Department cable published by Wikileaks shows that "China began to warn oil majors against conducting oil exploration activities in the disputed South China Sea in 2006, the year Tillerson became ExxonMobil's chairman and chief executive," the Morning Post further detailed.

According to U.S. Energy Information Administration data from 2013, the South China Sea contains 11 billion barrels of oil and 190 trillion cubic feet of natural gas.

U.S. Energy Information Administration

As Lee Fang and I recently revealed for The Intercept, while Tillerson served as CEO of Exxon, the U.S.Department of State directly intervened on the company's behalf to help the company win favorable financial terms to tap into that offshore oil and gas in countries which own offshore oil and gas in the South China Sea in both Vietnam and Indonesia.

Vietnam

On Jan. 12, the New York Times became the first news outlet to dig into Exxon's bounty of South China Sea offshore oil and gas and how it could possibly relate to Tillerson's hardline views on the disputed territory there.

"What is also not clear is the extent to which Mr. Tillerson's tough stance on the South China Sea springs from his extensive experience in the region during his time as chief executive of ExxonMobil, when his company became embroiled in bitter territorial disputes over the extensive oil and gas reserves beneath the seafloor," wrote the Times. "During his tenure, the company forged close ties to the Vietnamese government, signing an agreement in 2009 with a state-owned firm to drill for oil and gas in two areas in the South China Sea."

That agreement was completed with a "quiet signing given sensitivities with China," according to a State Department cable published by Wikileaks. ExxonMobil Vietnam's then-President Russ Berkoben told the State Department that "although EM is uncertain of China's reaction, it is ready if China reacts," according to the cable. The deal made Exxon the largest offshore acreage holder in Vietnam, with 14 million acres to explore and tap into.

In 2008, the South China Morning Post reported that Exxon had "been approached by Chinese envoys and told to pull out of preliminary oil deals with Vietnam." Vietnam stood its ground, telling China that Exxon and other companies had a right to drill in its territorial sea under its laws.

Three years later in 2011, Exxon said it had "encountered hydrocarbons" in the area during its exploratory drilling in a company statement. China reacted with fury, moving its own state-owned oil platform, belonging to China National Offshore Oil Corporation (CONOC), to the same area in 2014.

U.S. Secretary of State at the time John Kerry called CONOC's move "aggressive" and "provocative," with the Chinese Foreign Minister Wang Yi telling Kerry to "speak and act cautiously" on the issue.

On Jan. 13, PetroVietnam and Exxon announced a $10 billion deal to build a natural gas power plant in the country, set to be sourced with the gas Exxon will tap from the South China Sea via the Ca Voi Xanh offshore field. Exxon will also ship the gas to Vietnam via one of its underwater pipelines.

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