By Frank Yuan
As conflict in the Middle East rattles global energy markets, energy security is again climbing the strategic agenda in Beijing. China, the world’s largest importer of oil and gas, remains heavily dependent on distant supply routes that pass through some of the world’s most volatile choke points.
Could the answer be in the South China Sea? If control of the South China Sea can secure an energy shipping route for China, or guarantee access to large quantities of hydrocarbon resources on the seabed, it would provide a key imperative for Beijing to realize its claims in the “nine-dash line”. However, such benefits are more limited upon closer examination.
China’s energy lifeline
The South China Sea is certainly a vital link in China’s energy supply chain: it carries about 80% of China’s crude oil imports (nine million barrels out of the 11.3 million barrels imported per day in 2023), or nearly 60% of its total oil supply, given its relatively small domestic production. China also imports about 40% of the natural gas it uses, including about 25% imported as liquified natural gas (LNG) shipped through the South China Sea. With limited natural reserves domestically, China will continue to need hydrocarbon imports for its aviation, military, and industrial purposes.
But China’s energy lifeline goes far beyond this region. Fossil fuel exports from the Middle East, which provides about half of China’s oil imports, traverse thousands of kilometers through the Indian Ocean before reaching the Strait of Malacca, a widely acknowledged chokepoint for China. Controlling the South China Sea would be a necessary but not sufficient condition for securing this line of communication.
Oil and gas reserves in the South China Sea
The most recent available estimate from the U.S. Energy Information Administration puts “proven and probable” reserves of crude oil in the South China Sea at about 3.6 billion barrels of oil, with potentially another 2.4 to 9.2 billion barrels of undiscovered reserves (inferred from known reserves and geological data).
Areas currently administered by China have about 1.4 billion barrels. But if China were to realize its claimed exclusive economic zone in the “nine-dash line” overlapping with about half of the areas claimed by Malaysia, Brunei, and Vietnam, Beijing could control the substantial resources. Assuming an even distribution and the maximal quantity of undiscovered reserves, this could add about 3.8 billion barrels of crude oil to China’s reserves.
Assuming natural gas reserves in the area are also distributed evenly, controlling the “nine-dash line” could give China another 440 billion cubic meters (bcm) of gas in probable reserves, as well as 1,190 to 2,980 bcm in potential reserves.
The oil reserves there would be equivalent to less than eight months of China’s oil consumption, or less than a year of its imports. This would translate into a small stream of supply over multiple years. These would not make China self-sufficient.
To be sure, the oil resources are significant for the smaller economies of Vietnam, Malaysia, and the Philippines. As Beijing repeatedly pressures them to halt offshore drilling in the disputed area, energy exploration has become intertwined with maritime jurisdiction disputes.
For China, natural gas is the more significant resource in the South China Sea, although any such discussion should be prefaced with a reminder that natural gas comprises only 8% of China’s primary energy supply and 3% of its electricity generation.
The probable and undiscovered reserves in the “nine-dash line” are equivalent to about four to eight years of China’s gas consumption at the 2024 level (depending on how much potential reserves are realized) or substituting 10 to 20 years of its imports. These reserves could allow China to significantly reduce its reliance on natural gas imports.
China’s expanding options for gas
But the gas in the South China Sea would still be produced and transported from offshore with the attendant risks. Far-away production wells, undersea pipelines, or ships are vulnerable to sabotage, leaving the burden of escalation on Beijing. The safer option would be importing through overland pipelines from Russia or Central Asia: attacks on land would be more obvious and riskier for the adversary.
Outside of a conflict, what matters more to China is having access to hydrocarbons on the open market. Under politically tolerable arrangements such as joint development, reserves in the South China Sea could still be made available – even if the profits have to be shared. Persistent regional tensions, on the other hand, prevent the gas from being produced at all.
To diversify its gas supply sources, Beijing has also been developing overland pipelines, with the most recent example being the trans-Siberian gas pipeline with Russia, after years of stalemate in its negotiation. With an estimated annual delivery capacity of 50 bcm or 11% of China’s gas consumption in 2024, this pipeline could satisfy a substantial part of China’s gas demand.
Moreover, there are signs that China’s appetite for gas imports is starting to taper off. Transport electrification is edging out gas-powered vehicles. Gas-fired powerplants are being squeezed by the rapid rollout of renewable energy assets which generate electricity more cheaply. Long-distance power transmissions and energy storage build-out could tilt the economic balance further towards renewables. China has also been making inroads developing new gas fields onshore and near-shore.
All told, fully realizing its claims in the South China Sea would hardly “solve” China’s problem of energy security. At most, it would give China access to offshore gas reserves in peacetime, but offshore gas plays a minor and potentially diminishing role in China’s energy supply in any scenario.
Frank Yuan is an adjunct fellow at the UTS:Australia-China Relations Institute.
