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Brunei, an oil-rich nation in Southeast Asia, watched with near horror as world energy prices fell from 2014 to 2016. Reserves were running out. Its lifeblood of 80 years at stake, the tiny, wealthy country is looking for other sources of prosperity, <a href="https://www.voanews.com/a/if-brunei-takes-china-energy-deal-neighbors-may-follow/4690627.html">reports VOA News.</a>
China is offering to be a source, and its China that stands to prosper politically.
Chinese President Xi Jinping agreed to support joint exploration with Brunei for oil and gas, likely in a rectangular block of the South China Sea extending from the Bruneian coastline on the island of Borneo. Thats Bruneis exclusive economic zone, but China says some of it falls under its flag.
A deal would help Beijing by showing skeptics in Malaysia, the Philippines and Vietnam that ties with China pay off despite sovereignty disputes like who should rule Bruneis exclusive economic zone.
Chinas saying, Were promoting joint development, were willing to cooperate, its win-win for everybody, said Carl Thayer, professor emeritus with the University of New South Wales in Australia.
Without a better name around Southeast Asia, China risks more pressure from an alliance including Australia, India, Japan and the United States. Those countries, more militarily powerful as a unit than China, want Beijing to quit expanding control in the disputed sea over objections from smaller Asian governments whose economic zones overlap Chinese claims.
Brunei as a model
China has invested about $4.1 billion in Brunei. Theres an energy equipment service contract, to start, and Chinese companies built a 2,680-meter-long sea bridge. One offered $79 million worth of bonds earlier this year to fund a petrochemical plant. A $3.4 billion oil refinery is in the planning stages.
Any deal that China has with ASEAN would be a good role model. Its like the onion skin being peeled off one by one and it makes (a) good business case for China that they are interested in the commercial part of it, said Eduardo Araral, associate professor at the National University of Singapores public policy school. ASEAN refers to the 10-country Association of Southeast Asian Nations.
For Brunei the good thing is they dont have to fend off China, he said.
Energy makes up some 60 percent of the Bruneian GDP. The economy shrank 2.5 percent in 2016 before rising 1.3 percent last year along with world energy prices, but much of the undersea fuel near Bruneis coasts is tapped out.
Brunei keeps quiet about the sovereignty problem with China even as fellow Southeast Asian states Vietnam and Malaysia, under new Prime Minister Mahathir Mohamad, speak out. China takes Bruneis silence as goodwill and a vote for more ties with Chinas $12 trillion economy, the worlds second largest.
In late November the Chinese president met Bruneis Sultan Haji Hassanal Bolkiah in the Southeast Asian leaders capital Bandar Seri Begawan. The leaders agreed to support relevant enterprises of the two countries to cooperate in the areas of maritime oil and gas resources, Chinas official Xinhua News Agency reported Nov. 20.
Brunei has just 430,000 people but sits on 1.5 billion barrels of crude oil reserves plus 15 trillion cubic feet of natural gas beneath the seabed, according to the U.S. Energy Information Administration.
The Philippines may be next for a China deal. In November Manila and Beijing signed a memorandum of understanding that establishes a process to do joint offshore oil and gas exploration. Malaysia leads in the South China Sea with access to reserves of 5 billion barrels of crude oil and 80 trillion cubic feet of gas.
Search for equity
Whether other countries trust China as an energy exploration partner depends on how a Brunei deal takes shape. It should be done under the laws of both sides and international agreements, South China Sea analysts say.
You have to find out under whose law, under whose jurisdiction this kind of joint exploration (takes place), said Termsak Chalermpalanupap, a fellow with the ISEAS Yusof Ishak Institute in Singapore. In the past, it was always under Chinese law, under Chinese jurisdiction, which implied that everything in the South China Sea belongs to China. Thats the main objection.
A deal with Brunei consistent with a China-ASEAN maritime code of conduct would help Beijings cause, said Carl Baker, director of programs with the think tank Pacific Forum CSIS in Honolulu. The code, still being negotiated, would spell out how to avoid mishaps despite sovereignty issues. China might also consider deferring its claims, he said.
China, backed by Asias strongest armed forces, has upset the other five maritime claimants by building up small islets for military use and passing coast guard ships through disputed tracts.
If China could convince Brunei to undertake joint exploration in a disputed area, it would certainly help set a precedent for others, Baker said.
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If Brunei Takes China’s Energy Deal, Neighbors May Follow

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A maritime energy exploration agreement is being seen by some as an attempt to continue improving relations between China and the Philippines, countries once so opposed that their rift over maritime sovereignty went to a world arbitration court, <a href="https://www.voanews.com/a/energy-deal-deepens-once-unimagined-sino-philippine-friendship/4680973.html">VOA reports.</a>
Philippine and Chinese officials inked a memorandum of understanding Nov. 20 to look together for oil or gas under the South China Sea. The two countries contest sovereignty over parts of the sea, leading the Philippines to file for arbitration and win its case against China in 2016.
Over the past two years, China has extended economic aid to the relatively poor Philippines. Philippine President Rodrigo Duterte in turn set aside the sovereignty dispute, saying theres no way his country could win a war with China.
But the Philippine government says it will accept no less than 60 percent of any joint fossil fuel discoveries, and China is expected to comply as a way of building stronger ties with a still skeptical Philippine public.
Joint exploration demonstrates at least superficially on the Chinese side that they are trying to engage in diplomacy and to build bilateral relations through various kinds of joint activities, so I think thats a win for China diplomatically, said Stephen Nagy, senior associate politics and international studies professor at International Christian University in Tokyo.
Memorandum of understanding
The two countries inked their exploration pact as one of 29 agreements signed during a state visit to the Philippines by Chinese President Xi Jinping. It calls for establishing a joint steering committee as well as at least one working group with representatives from each sides major oil drillers. The committee will negotiate more precise deals on where to look for fuel.
The memorandum does not specify where the two sides would explore — some locations are more sensitive than others — or who would take how much of any fuel discovered.
Nothing has been really set in stone with respect to the respective oil and gas joint development at this point, said Jay Batongbacal, a University of the Philippines international maritime affairs professor. The agreement literally is merely a framework for the two countries to continue negotiating specific agreements on oil and gas exploration, so actually the substantial part of it is probably going to come much later.
Specific agreements may be hard to reach, he said, because the Philippine constitution and other laws limit joint work in certain tracts of sea. Some Filipinos worry that a more detailed deal could concede Philippine sovereignty to China.
Brunei, Malaysia, Taiwan and Vietnam also claim all or parts of the sea. All claimants prize the waterway for its fisheries, marine shipping lanes and the prospect of energy under the seabed. Some have explored jointly for oil before in the contested tracts.
In 2012 Chinese vessels pushed Filipino fishing boats out of the tiny South China Sea islet of Scarborough Shoal, which is west of the Philippine island Luzon. The incident led to world court arbitration case.
Something for both sides
The Philippine foreign minister was quoted saying earlier this year that China was willing to take a minority stake in any joint oil or gas discoveries.
Even if later deals are hard to reach or no one finds fuel, the 60-40 concession would help Beijing deepen its friendship with the Philippines, analysts say.
I think this is one way of signaling that China is willing to be a different kind of aid giver, said Alan Chong, associate professor at the S. Rajaratnam School of International Studies in Singapore.
Today many Filipinos — more accustomed to strong Manila-Washington relations — remain leery of tie-ups with a country that disputes sovereignty with their own. Some wonder too whether Beijings billions of dollars in of economic aid pledges over the past two years will materialize or, conversely, leave their country indebted to China.
Oil exploration has been politicized, said Christian de Guzman, vice president and senior credit officer with Moodys in Singapore. But he expects state-to-state ties will improve anyway through Dutertes term into 2022.
It is quite clear that for the duration of the Duterte administration that the tensions vis-a-vis China have eased, he said.
The Philippines also seeks new sources of oil and gas to avoid paying the rising prices of imported fuel, a contributor to inflation since August. Both China and the Philippines are looking for fuel elsewhere in the sea, but the Philippines leans heavily on foreign contracts to cover gaps in funding and expertise.
China will probably kick in most of the money and expertise for joint projects, given its wealth of experience, experts expect.
The joint effort would give Beijing access to valuable data on sea currents and underwater topography, Nagy said. It can use that data, he said, to develop submarine warfare.
Over the past decade, China has riled the other maritime claimants, including the Philippines, by landfilling tiny islets throughout the sea and militarizing some.
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