There is an active dialogue happening here on The Interpreter about the China-Vietnam oil rig confrontation, and I can't add much to the strategic dimensions of the debate. But there are a couple of additional aspects that are relevant to industry and business observers.
The first is that, notwithstanding the breathless rhetoric about the game-changing nature of the Chinese oil rig, there is nothing particularly special about Haiyang Shiyou 981. True, it was the first semi-submersible rig indigenously built in China, and state media emotionally proclaimed it 'mobile national territory' to guard China's 'blue national soil.' It's also true that the 981 is a fairly large ultra-deepwater unit by industry standards, capable of operating in 10,000 feet of water and then drilling through 33,000 feet of seabed.
But by comparison, leading edge rigs now are expected to operate in 12,000-14,000 feet of rough water and to drill through 40,000 feet of hard rock. Anyway, the real technology and value of these rigs is not in their floating superstructure but in the so-called 'topside package', the high-tech equipment that runs the complex drilling operation. The topside for the 981 comes from Norway.
To be sure, this rig is a hulking presence on the water, and China will certainly make progress in future offshore equipment projects. But the 981 took six years to build (the Koreans are much faster), was reportedly over budget, and had its share of teething troubles. An industry insider told me that only a Chinese national oil company would accept this product – for 'patriotic' reasons.
But my second point is the more important one. The owner and operator of rig 981 is China National Offshore Oil Corporation (CNOOC), the company which failed in 2005 to acquire America's Unocal and in 2012 did acquire Canada's Nexen. There was much Chinese anger about CNOOC's treatment in both cases. American politicians were concerned about economic and security threats posed by a Beijing-controlled oil company; CNOOC strenuously argued that it was a rational, commercial actor acting like any other multinational company. Likewise, in the face of Canadian hostility to the Nexen bid, China's envoy famously pronounced that 'business is business, it should not be politicized.'
Whatever the case for China's claims to an oilfield inside Vietnam's EEZ or the wisdom of acquiring Nexen (both are questionable), there can be no doubt that CNOOC now is acting politically. Accompanied by a flotilla of 80 ships (reportedly including seven government agency vessels), the 981 is being pushed into deployment in a reckless manner that no private commercial operator would undertake. Politics and operational risk aside, the insurance liabilities alone would likely stop a private deep-sea driller before he or she even left port.
This should be a crucial piece of the Chinese foreign investment debate in Australia, which deserves a fuller treatment on The Interpreter in the future. The fact is, state-owned companies (SOEs) do behave differently from private sector ones. It is quite natural for foreigners to question the motives of SOEs, and it is disingenuous for SOEs to downplay or dismiss their provenance. The ongoing 981 incident is proof that politics and business might be best kept separate, but often aren't.
