South China Sea Disputes Stall Energy Production, U.S. Says

Territorial disputes in the South China Sea, rich in oil and natural gas reserves, require a quick and peaceful resolution to boost energy production and meet growing regional demand, a U.S. official said.

“You have this conundrum of a region that needs energy and yet has a lot of territorial disputes or gray areas that inhibit the ability to produce some of it,” Robert Hormats, U.S. undersecretary of state for economic growth, energy and the environment, said today at a briefing in Hanoi. “These are long-term investments, so you really need to start now if you’re going to have the energy five years or 10 years out.”

Vietnam and the Philippines have rejected China’s map of the South China Sea as a basis for joint oil and gas development, leading to clashes in one of the world’s busiest shipping lanes. China claims “indisputable sovereignty” over most of the waters, including blocks off Vietnam that Exxon Mobil Corp. (XOM) and Russia’s Gazprom OAO (GAZP) are exploring.

Vietnam’s Foreign Ministry said March 15 that Cnooc Ltd. (883)’s moves to develop the oil- and gas-rich northern areas of the South China Sea violates its sovereignty. China’s biggest offshore oil explorer opened bids to foreign companies last year for 19 blocks near the disputed Paracel Islands, according to its website.

The South China Sea may hold 213 billion barrels of oil, equivalent to 80 percent of Saudi Arabia’s reserves, according to Chinese studies cited in 2008 by the U.S. Energy Information Agency.

To contact the reporter on this story: Nick Heath in Hanoi at nheath2@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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