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China's newly announced air defense identification zone over the East China Sea aims to shore up national security
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Cover Stories Series 2013> Monitoring East China Sea Airspace> Archive
UPDATED: July 5, 2008 NO. 28 JUL. 10, 2008
Calming Troubled Waters
China and Japan agree to jointly develop energy resources in the East China Sea

in this offshore field to land. In addition, having begun work on the west-east gas pipeline from Xinjiang Uygur Autonomous Region to Shanghai, the Chinese Government was more prepared to enter into another major gas project, including working with interested foreign parties.

The Xihu Trough started to attract the attention of major international oil/gas companies in 2003, when Royal-Dutch Shell and Unocal joined two Chinese oil companies to develop Chunxiao and other fields in an area covering 22,000 square km southeast of Shanghai with a distance of 500 km. The five-contract partnership was considered attractive due to the geographical proximity to Shanghai and Zhejiang, two of the most dynamic economic centers of China.

But the partnership, which gave each of two foreign companies a 20-percent stake to explore, develop and market Xihu gas, fell apart in October 2004. Both of the international partners withdrew, citing different value assessment of the project. More specifically, forecast for peak production was cut to about 25 million cubic feet of gas a day by 2010, compared with a previous peak estimate of 80 million cubic feet. The outburst of protest by Japan in that summer might have also contributed to the international companies' decision to pull out of the venture.

Although not publicly acknowledged, Chinese operation in Chunxiao field has been suspended since 2005, apparently as a gesture to honor Japanese sensitivities.

What is at stake?

To many Chinese observers who are familiar with the history of energy activities in the East China Sea waters, the outburst of protests by Japan came as a complete surprise.

First, in the late 1970s, Chinese and Japanese oil companies were both operating the East China Sea, in close proximity to each other. It was only that Chinese companies were luckier in identifying locations that were considered to be worth further exploration. The question is, why now has Japan made it an issue?

Second, Japan launched its protest based on the argument that the development of the Xihu Trough extends beyond the "median line" between the two countries. China has never recognized the unilateral demarcation line drawn by Japan and, the two countries have yet to reach

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