China Moves Oil Rig From Contested Waters

 China Moves Oil Rig From Contested Waters

Move Could Provide Opening for Beijing and Hanoi to Repair Relations

In this file photo, the Haiyang Shiyou oil rig 981 is pictured in the South China Sea. Associated Press

China is moving a drilling rig out of South China Sea waters claimed by both China and Vietnam, easing a two-month standoff that sparked deadly riots in Vietnam and tense encounters between Chinese and Vietnamese vessels.

The move could provide an opening for Beijing and Hanoi to repair relations and comes as the U.S. steps up criticism of China's efforts to enforce its claims to the strategically important sea. But China's government said its companies still had the right to explore the contested waters, raising the possibility that tensions could flare again.

China Oilfield Services Ltd. 601808.SH +0.35% , a unit of state-owned China National Offshore Oil Corp., said its deep-water HYSY 981 drilling rig had completed exploration and drilling operations off Triton Island, or Zhongjian Island in Chinese. The island is part of the Paracel Islands chain, which is claimed by both China and Vietnam.

A Vietnam coast guard official confirmed that the oil rig began moving Tuesday night local time. Rear Adm. Ngo Ngoc Thu, vice commander of the Vietnam coast guard, said the Chinese vessels that had been accompanying the rig were also moving. He said Vietnam was keeping its vessels at the site and watching the oil rig's movement.

Chinese officials had previously said the rig's work would be completed by August. A spokeswoman for China Oilfield Services, or COSL, confirmed drilling work had been completed ahead of schedule and said the rig's new intended location, near China's southern island of Hainan, isn't in an area of dispute with other nations.

China's Foreign Ministry said Wednesday that Chinese companies were within their rights to undertake work around the Paracel Islands. It said it opposed interference by Vietnam and had taken "necessary measures to safeguard the safety of operations" by COSL.

Tran Cong Truc, former chief of the Vietnamese government's border committee, said Vietnam would remain vigilant. "China's South China Sea policy is aggressive, so the withdrawal of the oil rig is only a tactic, a responsive measure they need to take right now."

Vietnam's foreign ministry spokesman, Le Hai Binh, said his country was determined to protect its sovereignty and demanded that China not move the oil rig back to "parts of Vietnamese waters stipulated by the U.N. Convention on the Law of the Sea."

Vietnam protested Chinese drilling in the area after it began in early May and had sent coast-guard vessels to confront the rig. Dozens of Chinese and Vietnamese maritime vessels had amassed near the disputed rig, with each side claiming its ships had been violently rammed by the other's.

The rig's deployment there drew criticism from Washington, which has called it provocative. The episode touched off anti-Chinese riots in Vietnam in May, in which five people were killed and hundreds of factories owned by Chinese and other foreign companies were looted and burned.

"A lowering of tensions and the initiation of talks between China and Vietnam will alter the current political dynamics," said Carl Thayer, an expert on maritime security issues. He said such moves would undercut U.S. efforts to make China's maritime claims an issue before a regional group of Southeast Asian nations.

China National Petroleum Corp., the country's largest oil company by production, controls the disputed exploration area, and said it would evaluate data collected during drilling to consider its next phase of work. It said the rig had found signs of oil and natural gas in the disputed waters.

The rig's presence there was viewed by security analysts as part of a recent pattern of Chinese assertiveness in the South China Sea. U.S. officials have pressed China over what they see as unilateral moves that upset regional stability. China rejects what it views as U.S. meddling.

Disputes between China and its neighbors over the South China Sea and East China Sea have emerged as one of the greatest threats to regional peace and prosperity, particularly as China looks to assert greater control over its immediate periphery.

China claims nearly the entire South China Sea as its historical waters, an assertion that brings it into increasing conflict with some of its neighbors, such as Vietnam and the Philippines. In addition to China, parts of the sea are claimed in part by five other governments.

The South China Sea is home to critical shipping channels and is believed to hold sizable oil-and-gas reserves, exploration of which has been hampered by competing claims. The U.S. Energy Information Administration estimates the sea holds around 11 billion barrels of oil and 190 trillion cubic feet in proved and probable reserves.

The rig's withdrawal coincides with a visit by Adm. Jonathan W. Greenert, the U.S. Chief of Naval Operations, to China this week for talks with his counterpart, Chinese navy chief Admiral Wu Shengli.

One of the topics high on their agenda is the implementation of a new code on unplanned encounters at sea that was agreed to by 21 Pacific naval powers, including China, in April. U.S. naval officials have said they hoped all members of the group would observe the code in all places, including waters where China's maritime claims are contested by its neighbors.

But the code isn't legally binding, and Chinese officials have suggested that Chinese ships won't necessarily observe it in what Beijing sees as its territorial waters.