12-21-2011, 06:47 PM
Over the past decade, Sino-American tensions have been increasing on all energy fronts, including the South China Sea (SCS). In addition to being the world's most valuable maritime trade route (worth at least $5 trillion to annual global trade), the SCS possesses significant fossil fuel reserves. Just how significant these reserves are is not yet fully known, but estimates range from 7 to 28 billions barrels of crude plus vast gas fields numbering in the hundreds of trillions of cubic feet. Methane hydrates (frozen methane) are also thought to be abundant. Dubbed the "ice that burns," methane hydrates have been identified by the US Energy Department as "the gas resource of the future." Present technology does not permit its commercial exploitation, but that is likely to change in the foreseeable future. . . . The Chinese government has also entered into extraction arrangements with some Western commercial entities. However, as far as "Big Oil" is concerned, dealing with a powerful country like China leads to a less favourable return on capital investment. The game plan for the future is to negotiate with weaker SCS governments, using a position of comparative advantage to extract maximum profit.