China's state-owned China National Offshore Oil Corp. issued a takeover bid July 23 for Canadian energy company Nexen. The $15.1 billion offer, if approved by the Canadian government, would increase the Chinese firm's technical capabilities by giving it access to offshore-drilling technology being used in the North Sea and in the Gulf of Mexico. Energy exploration and production in the South China Sea has so far remained close to the shores of controlling regional bodies and away from disputed areas, slowing progress into the sea's deeper waters. However, China National Offshore Oil Corp. recently finished construction on and began drilling with its first domestic deep-water capable semisubmersible rig, CNOOC 981. Smaller countries in the region, such as Vietnam and the Philippines, still rely on international cooperation for deep-water drilling because they lack the technological capabilities necessary for exploration in deeper waters; the farther offshore hydrocarbon sources are located, the greater the need is for additional technology that allows the platform and drilling equipment to withstand the harsher conditions of deeper waters. China's recent actions demonstrate its proactive approach to using energy exploration as a political tool to claim territory — in a region with numerous overlapping territorial claims, the search for additional hydrocarbon reserves is about more than just energy acquisition. As countries continue vying for control of the South China Sea, hydrocarbon exploration and production can lead to territorial claims. However, there is risk in exploring in the South China Sea, and continued slow progress toward exploration in deeper waters could eventually make hydrocarbon exploration of limited political use for smaller countries. Countries that rely on joint ventures for the necessary technology will be subject to market conditions for further exploration. China — the one country currently making progress toward unilateral capabilities — could continue to use hydrocarbon exploration as a political tool, regardless of the risk and time involved.
