South China Sea Oil: Two Problems of Ownership and Development 9789814376648

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The Institute of Southeast Asian Studies

Established as an autonomous organisation in May, 1968, tht Institute of Southeast Asian Studies is a regional research centre fof scholars and other specialists concerned with modern Southeast Asia. The Institute's research interest is focused on the many-faceted problems of modernization and development, and political and social change in Southeast Asia. The Institute is -governed by a twenty-four-member Board of Trustees on which are represented the University of Singapore aod Nanyang University, appointees from the Government, as well as representatives from a broad range of professional and civic organizations and groups. A ten-man Executive Committee oversees day-to-day operations; it is ex officio chaired by the Director, the Institute's chief academic and administrative officer.

"Copyright subsists in this publication under the United Kingdom Copyright Act. 1911, and the Singapore Copyright Act (Cap. 187). No person shall reproduce a copy of this publication. or extracts therefrom, without the written permission of the I.nstitute of Southeast Asian Studies. Singapore"

SOUTH CHINA SEA OIL : 'l'wo Problems of Ownership and Development

by

Roderick 0 ' Brien

Occasional Paper No. 47 Institute of Southeast Asian Studies Price :

S$8.00

Publications Review Committee

Professor Kernial S. Sandhu (Chairman) Dr . Corazon M. Siddayao (Co- ordinator) Dr . Huynh Kim Khanh Mrs . P. Lim Pui Huen Mr. M. Rajaretnam Mrs . Christine Tan

South China S~a Oil: T~o P~oblems of O~ ne~s~ ip and Deve lopment is the forty-seventh in the Occasi o na l Papers series published by the Institute o f Southeast Asian Studi es .

Occasional Papers are professional papers issued periodically on a variety of topics o f regi onal i ntere st . The responsibility for facts and opinions expres s e d in the work that follows rests excl us ively with Mr. Roderick O'Brien and his interpretati ons d o n o t necessar ily r e f lect the views or the policy of the In stitute o r its supp o rter s .

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The Institute also publishes books and papers from time to t i me in the following series: BOOKS/MONOGRAPHS: specialized studies o n t opics relating to Southeast Asia . SOUTHEAST ASI AN AFFAIRS: an annual review of significant political, economic an d social developments in the regi o n, with emphasis o n the ASEAN countries. Contents include analyses in depth o f topics of regional concern and of specifi c i ssues o n a country-by-country basis. FIELD REPORTS: studies embodying the results of , and based exclusively on, the Institute's research programme; RESEARCH NOTES AND DISCUSSIONS: contributions which represent the tentative results of ongoing research, and of discussions, printed for the purpose of stimulating further thought on specific subjects. papers and proceedings o f TRENDS IN SOUTHEAST ASIA: Tre nds seminars held on individual Southeast Asian c ountr i es ; INTERNATI ONAL CONFERENCE : publications based on proceedings of International Conferences sponsored by the Institute itself o r in conjunction with other o rganizati ons; CU RRENT ISSUES SE MINARS: publications growing o ut of the Institute's Current Iss ues series of seminars, the objective o f which is to bring together knowledgeable and interested people t o discuss topics of current concern and importance to the region.

SOUTHEAST ASIAN PERSPECTIVES: aimed at wider circulation of Southeast Asian thinking, these publica~ions are original contributions in English of Southeast Asians or translations of their significant papers and monographs appearing in one of the local or national languages of the region; ORAL HISTORY PROGRAMME: publications based on the oral memoirs of persons who have made notable contribution to, or have first-hand information to impart on, certain aspects of the development of Singapore and Malaysia; LIBRARY BULLETINS: papers on Southeast Asian librarianship and bibliography. 20 April 1977

Director Institute of Southeast Asian Studies

CONTENTS Page ACKNOWLEDGEMENTS INTRODUCTION I:

THE GEOLOGY AND PHYSIOGRAPHY OF THE REGION The Formation of Oil The Physiographic Features The Geological and Physiographic Features and National Sovereignty The Limits to Available Knowledge of South China Sea Geology Oil Company Operations as an Indicator of Areas of Geological Interest

II:

PROBLEMS OF OWNERSHIP OF OIL DEPOSITS IN THE SOUTH CHINA SEA: THE EXERCISE OF SOVEREIGNTY OVER THE CONTINENTAL SHELF AND OVER ISLANDS

1

7

7 9

10

14

17

19

Adjoining Boundaries Singapore and Hong Kong

19

The Island Claims

26

The Development of International Principles to Solve Sovereignty Conflicts Rules for Adjoining Boundaries (Opposite and Adjacent)

29

Rules for Establishing Sovereignty over Islands Solving Competing Claims by Negotiation

40 43

Solving Competing Claims by Conciliation and Arbitration

45

Conclusion

46

24

35

Page III: OIL

DEV3:L :::>P IIENT AND ECONOMIC NATIONALISM

47

Reasons for Foreign Participation Concession Systems Modification of the Concession System Development by the State The Production-Sharing Contract Conclusion

47

CONCLUSION

BIBLIO GRAPHY

so 57 59 67

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ACKNOWLEDGEMENTS This paper was first prepared in partial fulfilment of the requirements of the degree of Master of Arts of I would like to thank my the University of Hong Kong. supervisors, Dr. Ron Hill and Mr. Stewart Richards, for I would also like to express my gratitude to their help. Miss Joan Leung for her continued encouragement . I would like to thank Hj. Satem for awakening my contracts, and our teacher encouraging my interest in

my friend Enche Adenan bin interest in production-sharing Professor D.P. O'Connell for the law of the sea.

My colleagues at the University of Hong Kong, especially Professor Dafydd Evans, deserve thanks as well as many other academics who have assisted me, including Professors Hugh Hickling and Narendra Singh of the University of Singapore, Professors Peter Wang Jen-huong and Paul Hsu of National Taiwan University, Miss Eileen Tang of the Institute of Southeast Asian Studies, and Mrs. Myrna Feliciano of the University of the Philippines. Many petroleum industry and government and intergovernmental o fficials have helped and advised me with It has been my good fortune that some have the study . not only helped me, but have also become my friends. Some would prefer to remain anonymous and rather than make distinctions, I have chosen to omit their names, but at the same time to record my appreciation. Finally my thanks to the Institute of Southeast Asian Studies for their continued assistance. Hong Kong August 1976

J.R.O'Brien

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