China and Japan have reached a "principled consensus" aimed at leading to joint development of Chunxiao gas field in the East China Sea. Agreed on June 18, this came one month after Chinese President Hu Jintao's visit to Japan, during which emerged reports of a pending breakthrough in bilateral diplomatic negotiations over exploration of natural resources in the waters bordering the two countries.

Highlights of the consensus include the following:

- Cooperation is to take place "in the transitional period prior to delimitation without prejudicing their respective legal positions" [on territorial waters].

- Actual joint development of the specified block [see map] has to wait for completion of respective domestic procedures and a bilateral agreement to be in place.

- China puts forward Chunxiao for participation by a Japanese legal person. Company-level cooperation shall be supported by government-level agreement.

- Consultations are to continue "for the early realization of joint development in other parts of the East China Sea."

The Chunxiao puzzle

Chunxiao has become a frequent reference in discussions about ties between China and Japan, particularly since 2004. In that summer, mainstream Japanese media launched an intensive series of coverage about Chinese activities in the East China Sea. The storyline has been rather straight forward: the near completion of Chunxiao (called Shirakaba in Japan) gas field implies that China is close to drilling for gas and/or oil that potentially belongs to Japan.

The Japanese Government protested and China offered to enter into consultations. From October 2004 to November 2007, the two sides went through 11 rounds of consultations specifically focusing on the East China Sea issue. Those consultations paved the way for the recent announcement.

Chunxiao gas field acquires its name from Chunxiao Structure, which is a part of the Xihu Trough and only 110 km away from the coast of east China's Zhejiang Province. In 1992, the field was among the offshore areas that China sought to develop by inviting the cooperation of foreign investors. This round of bidding did not receive much of an international response, because China lacked the onshore infrastructure to process offshore gas, among other uncertainties.

There was little further reference to Chunxiao until 2000, when the fifth test well there produced yields significant enough for commercial exploration. As part of a larger scheme to diversify energy mix in the country's eastern coastal cities, the Chinese Government decided to support bringing gas