Thursday, October 18, 2007

Malaysia, Brunei - No More Gunboats?




An interesting article appeared on Rigzone about the importance of knowing your location and your boundaries, especially when you have quite a few neighbours interested in the resources.




Essentially, Malaysia and Brunei are close to reaching an agreement over a maritime boundary dispute that has caused some headaches for oil and natural gas exploration in an area west of Borneo Island since 2003.




  1. Why is this area of interest?
  2. Who is laying claim to the islands?
  3. Where are they?
A good summary from the article states: "At stake is a so-called deepwater area, near where several oil and gas fields have been discovered by both sides in recent years. Malaysia's state-owned Petronas in 2003 awarded two upstream acreages in the area, which it calls blocks L and M, to U.S. independent Murphy Oil Corp. (MUR), a year after Brunei had awarded nearly identical areas under its own licensing around.The tiny sultanate signed off block L as block J to a consortium headed by French oil giant Total S.A. (TOT), while a group led by oil major Royal Dutch Shell PLC (RDSB.LN) secured block M as block K."



Spratly Islands



These islands, known as the Spratly Islands, are a tinderbox in a climate where oil and gas exploration can help turn around the economies of many countries.



The Spratly Islands consist of 100 - 230 islets, coral reefs and sea mounts (tablemounts). This archipelago is spread over 250,000 sq km of sea space, and yet the total land mass of the Spratly Islands is a mere 5 sq km. None of the land is arable. Until recently, the Spratly Islands have not been occupied by humans. Presently, the countries with territorial claims are now using military means --airstrips and armed forces -- to reinforce their claims



The Spratly Islands are situated in the South China Sea -- one of the largest continental shelves in the world. Typically, continental shelves are abundant in resources such as oil, natural gas, minerals, and seafood. It is etimated that oil and natural gas reserves in the Spratly region are estimated at 17.7 billion tons; Kuwait's reserves amount to 13 billion tons. The Spratly reserves place it as the fourth largest reserve bed worldwide.



The UN Convention on the Law of the Seas article 55 and 77 play an important role in determining ownership of these rights. Article 55 establishes the EEZ (Exclusive Economic Zone), while Article 77 defines a countries continental shelf.



Under Article 121(3) of the UN Convention on the Law of the Sea (UNCLOS): "Rocks which cannot sustain human habitation or economic life of their own shall have no exclusive economic zone or continental shelf." Unfortunately, UNCLOS provides no further guidance as to how a 'rock', capable of sustaining a claim to a 12nm territorial sea and a further 12nm of contiguous zone, should be distinguished from a fully fledged island with continental shelf rights and an EEZ of up to 200nm breadth. Many of the 36 Spratly 'islands' would seem to fall more readily into the category of 'rock' rather than 'island' - providing fertile ground for dispute even were the sovereignty issue to be resolved.



Overlapping claims resulted in several military incidents since 1974 and in several countries awarding foreign companies exploration rights in the same area of the South China Sea.
Claims to the various islands in this archipelago started as early as the 1930s. Since the late 1950s, 29 oil fields and 4 gas fields in the Spratly region have been developed.



An EEZ and Firing Shots?



In the winter of 2000, Brunei said it would begin to offer exploration blocks after declaring an EEZ (Exclusive Economic Zone) , giving it rights to fishing grounds and mineral extraction from the sea bed.



In May 2007, Malaysia, not happy about the dispute, the claim, and the EEZ, decided to fire some warning shots to remind Brunei, which is tightly wedged between Malaysian territory on Borneo island, of its claim by sending its navy to chase off a drilling team from Total. Malaysia, which has had territorial disputes with all its neighbours, argues Brunei only has jurisdiction over its continental shelf, in water up to 200 metres deep. About three quarters of the EEZ is in deeper water.



As any one watching world politics would expect, both governments are keen to keep this dispute under the radar of any observers and potential investors in the area. Brunei, a very small sultanate, has only 330,000 people and no army.



Redraw the Map?



"The leaders discussed the long-standing issue of maritime delimitation, on which both sides have put forward new proposals, and agreed on the need to resolve the matter urgently," the leaders of Malaysia and Brunei said in a joint statement.



There is now the potential idea to redraw the map. The idea being, that once the map is redrawn, any and all the competing oil claims could be sorted out.



Redrawing the sea border would be a departure from the more pragmatic solutions reached in some previous oil disputes,where countries have agreed to jointly develop oil from a contested area rather than tackle the primary issue of sovereignty.



Is Han's Island similar? A Russian Sub at the Pole?



As one can tell, this is an interesting case study of the UNCLOS, EEZ, the continental shelf, and boundary disputes.



Redrawing a map is an interesting solution to this dilema in the South China Sea, but as one can see with the current Russian submarine trip to the North Pole, disputed by Canada, Denmark and the United States. Ownership of these 'rocks', the contential shelf, can lead to diplomacy by gunboats.



Canada and Denmark have been planting flags and making trips to little Han's Island which is located between Baffin Island and Denmark.



Time will tell how these situations resolve themselves, but it shows the importance of boundaries and being able to get along with your neighbours.


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