THE INDONESIA-SOUTH VIETNAM CONTINENTAL SHELF DISPUTE: PETROLEUM POLITICS IN THE SOUTH CHINA SEA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84-00825R000300220001-6
• Release Decision: RIPPUB
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• Document Page Count: 35
• Document Creation Date: November 17, 2016
• Document Release Date: March 13, 2000
• Sequence Number: 1
• Publication Date: June 1, 1974
• Content Type: REPORT

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Confidential
No Foreign Dissem
The Indonesia-South Vietnam Continental
Shelf Dispute: Petroleum Politics in the
South China Sea
Confidential
BGI RP 74.16
June 1974
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CONFIDENTIAL
NO FOREIGN DISSEM
Summary . . . . . . . . . . . . . . . . . . . . .
The Current Situation , , , , , , , , , , , , , ,
Indonesia's Continental Shelf Claim and
Petroleum Concession , , , , , , , , , , , , , , 2
South Vietnam's Continental Shelf Claim
and Petroleum Concessions , , , , , , , , , , , 3
Basis of the Dispute , , , , , , , , , , , , , 4
Negotiations: Progress and Prospects , , , , , , , 6
Precedent for Continental Shelf Divisions , , , , 7
Outlook . . . . . . . . . . . . . . . . . . . . . 7
Appendixes , , , , , , , , , , , , , , , , , Following text
A: Indonesia - Malaysia Continental
Shelf Boundary in the South
China Sea
B: Limits of the Continental Shelf
of Indonesia in the South China Sea
C: Limits of the Continental Shelf of
the Republic of Viet-Nam
MAPS
Indonesia-South Vietnam: Continental Shelf
Claims and Petroleum Concessions , , , Frontispiece
Indonesia: Sovereign Water Claim , , , , Following Appendixes
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Indonesia-South Vietnam:
Continental Shelf Claims and Petroleum Concessions
Concessions granted by South
Vietnam in 1974
Concessions granted by South
Vietnam in 1973
Concessions granted by Malaysia
Indonesia-Malaysia continental
shelf boundary
100 200 Kilometers
CONFIDENTIAL
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CONFIDENTIAL
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NO FOREIGN DISSEM
A large natural gas deposit recently was discovered
in a sector of the continental shelf some 12,000 square
miles in area, claimed by both Indonesia and South Vietnam.
The strike was made by an Italian company operating under
a production-sharing contract with Indonesia.
The overlapping claims result from differing inter-
pretations by Saigon and Jakarta of the equidistance principle
commonly used to allocate shallow seabeds -- those less than
200 meters deep. Indonesia espouses the archipelago theory
and consequently used the Natuna and Anambas Islands, lying
far north of her main islands, in constructing a median
line to divide the shelf. South Vietnam, however, disregarded
these island chains in delineating its shelf claim. A 1972
conference held to resolve these differences failed; sub-
sequent efforts to reopen talks have been twice deferred.
Saigon recently leased to oil companies a number of
petroleum concession blocks, including two that lie partially
within the disputed area. Additional tension has been
created by plans of the Italian company to conduct exploratory
drilling in another sector of the disputed area and by
Jakarta's buildup of its air force strength on Great Natuna
Island. Reluctance by oil companies to engage in full-scale
exploration or exploitation operations in disputed shelf
sectors may, however, induce the contesting parties to
negotiate their differences.
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Central Intelligence Agency
Directorate of Intelligence
June 1974
THE INDONESIA - SOUTH VIETNAM CONTINENTAL SHELF DISPUTE:
PETROLEUM POLITICS IN THE SOUTH CHINA SEA
The Current Situation
1. In early 1974 a large natural gas deposit, estimated
to comprise as much as 7 trillion cubic feet (200 billion
cubic meters), was discovered on a 12,000-square-mile*
sector of the South China Sea continental shelf claimed
by both Indonesia and South Vietnam (see frontispiece).
The deposit reportedly was struck in the eastern part of the
disputed sector by AGIP (Azience Generale Italiane Petroli
Sociata Per Aziona), an Italian petroleum company operating
under a production-sharing contract with the Indonesian Gov-
ernment.
2. Although neither AGIP nor the Indonesian Government
has announced the discovery, Saigon has recently learned of
it. There are as yet no indications that South Vietnam will
take any action against the AGIP operation, but, AGIP's plans
to begin further exploratory drilling in the western part
of the disputed area may precipitate a reconnaissance mission
by the Vietnamese Navy. Indonesia, perhaps wary of an incident
similar to the South Vietnam - PRC clash over the contested
Paracel Islands in early 1974, has built up its air force
strength and upgraded its air facilities on Pulau Natuna Besar
(Great Natuna Island), in the South China Sea just to the
south of the contested zone.
* AZZ miles are nautical miles.
NOTE -- This memorandum was prepared by the Office of Basic
and Geographic Intelligence and coordinated within the
Directorate o Intelli ence. Comments and questions may be
directed to Code Z43, extention 3057. 25X1A
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CONFIDENTIAL
3. The sector of the continental shelf claimed by both
Indonesia and South Vietnam lies in the shallow southwestern
part of the South China Sea, a semi-enclosed water body that
is everywhere less than 200 meters deep. Seabeds at these
depths, according to provisions of the 1958 Geneva Convention
on the Continental Shelf, fall under the jurisdiction of the
neighboring coastal states.* The Convention, however, does
not provide adequate guidelines for the allocation of the
seabed among coastal states.
4. Each of the fringing states -- Malaysia, Thailand,
and Cambodia as well as Indonesia and South Vietnam -- has
made a unilateral claim on the shelf that maximizes its cut
of the potentially oil-rich seabed. The result is a muddle
of overlapping shelf claims. South Vietnam's claim, for ex-
ample, not only overlaps the sector of the shelf claimed by
Indonesia in the south but large sectors claimed by Thailand
and Cambodia in the west as well. Recent reports of oil and
gas strikes by exploratory rigs elsewhere in the southwestern
South China Sea - Gulf of Thailand region are certain to make
future negotiations between any of the shelf claimants difficult.
Indonesia's Continental Shelf Claim and Petroleum Concession
5. Of the five states bordering on the southwestern
South China Sea and the Gulf of Thailand, only Indonesia
currently extracts petroleum from its continental shelf.
All of its offshore crude oil production (about 200,000 barrels
daily out of a total production of 1,400,000 barrels daily)
is from fields in the southwestern Java Sea and from the
Makasar Strait, both well inside Indonesia's claimed sovereign
waters and not in dispute (See map following appendixes).**
* The Convention defines the continental shelf as "the seabed
and subsoil of the submarine areas adjacent to the coast but
outside the area of the territorial sea, to a depth of 200
meters or, beyond that limit, to where the depth of the super-
jacent waters admits of the exploitation of the natural resources
of the said areas."
** Indonesia claims jurisdiction over all seas, seabeds,
subsoil, and superjacent airspace within a perimeter of baselines
that connect the outermost points of the outermost islands
of its archipelago.
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Because of the advanced stage of its offshore petroleum
operations and a desire to avoid haggling over seabed resources
jurisdiction, Indonesia has been in the forefront among
Southeast Asian nations in negotiating its continental shelf
boundaries outside of its archipelago limits. Between 1969
and 1972 agreements with Malaysia, Thailand, and Australia
were signed and ratified; only the lengthy shelf boundary
with South Vietnam and short boundaries with the Philippines
and India remain to be resolved.
6. In 1968, with several foreign oil companies lobbying
for exploration concessions on the South China Sea continental
shelf, the Indonesian Government made an undefined claim to
a sector of the shelf and issued a production-sharing contract
to AGIP to operate in the region. The precise limits of Indo-
nesia's claim, however, did not begin to take shape until
1969, when the boundary with Malaysia was defined (Appendix A);
the northern perimeter of the claim was not delimited until
1 October 1971. A presidential decree defined the limits
of the claim (coterminous with the AGIP concession) between the
two segments of the Malaysia boundary (Appendix B). The decree,
issued only 1 month after Saigon had issued a similar decree
establishing its South China Sea shelf claim, outlined precisely
the 12,000 square miles of conflicting claims and set the stage
for abortive negotiations in June 1972.
South Vietnam's Continental Shelf Claim and Petroleum Concessions
7. South Vietnam defined its continental shelf in a decree
issued on 6 September 1971 (Appendix C). The shelf claim was
divided into 40 petroleum exploration-exploitation concession
blocks, 30 of which were opened for bids by foreign oil com-
panies in mid-1973. Agreements were subsequently signed with
four companies and concessions awarded in eight blocks.
Although Saigon had earlier indicated that it would not solicit
bids on concession blocks that extended into the disputed
area, two blocks (granted to Pecten VN and Sunningdale) do over-
lap shelf areas claimed by Indonesia (See frontispiece). Seismic
surveys, begun in late 1973, probably did not reach into the
contested sector. Exploratory drilling, scheduled to start
this summer, will also remain outside the disputed waters.
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8. Saigon hoped that the shelf dispute would be resolved
before a second group of blocks was opened for bidding.
But, anxious to get the foreign exchange, Saigon offered
several more offshore blocks to foreign oil companies on
19 February 1974. All 33 companies that submitted qualifying
questionnaires qualified for the second round of bidding
that got underway on 21 May. According to an unofficial
tally by the U.S. Embassy in Saigon, ten more exploration
blocks have now been awarded to six bidders. About one-half
of Block 12 and a small part of Block 4 extend into the
disputed sector (See frontispiece). At the request of the
Indonesian Government, oil companies holding concessions
granted by Jakarta refrained from submitting bids for South
Vietnam concessions located in the disputed area.
Basis of the Dispute
9. Most agreements on the continental shelf have been
based on principles established in the 1958 Convention on the
Continental Shelf, which calls for the use of an equidistance
principle in the absence of other provisions. In the division
of the shelf between opposite states, the Convention states
in Article 6, paragraph 1 that:
Where the same continental shelf is adjacent to
the territories of two or more States whose coasts
are opposite each other, the boundary of the con-
tinental shelf appertaining to such States shall
be determined by agreement between them. In the
absence of agreement, and unless another boundary
line is justified by special circumstances, the
boundary is the median line, every point of which
is equidistant from the nearest points of the
baselines from which the breadth of the territorial
sea of each State is measured.
10. The presence of islands is the single most complicating
factor in establishing shelf boundaries. In water bodies such
as the South China Sea where islands complicate the division
of the shelf, coastal states have usually resorted to the
Convention's "special circumstances" clause to equitably
define the boundaries.
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11. The existence of the Indonesian islands of Kepulauan
Natuna (Natuna Islands) and Kepulauan Anambas (Anambas Islands),
which extend some 200 miles northwest of Kalimantan in the
South China Sea, precludes an easy division of the South
Vietnam - Indonesian continental shelf based on the simple
equidistance principle. Each country, nonetheless, has based
its shelf claim on this principle, but each has applied it
in a different way. South Vietnam has disregarded the Natuna
and Anambas Islands and has drawn its median line halfway
between the Vietnam mainland and a baseline joining the In-
donesian islands of Kalimantan and Bangka, a large island
off the east coast of Sumatera. Indonesia, on the other hand,
has constructed its median line from baselines connecting
the Natuna - Anambas Islands. Perhaps to give added credibility
to the use of its own islands in drawing its shelf boundary,
Indonesia appears to have drawn the median line halfway between
its islands and baselines extending from the South Vietnam
coast to Con Son Island, about 50 miles off the coast.
12. In negotiating shelf boundaries with Malaysia, Thailand,
and Australia, Indonesia's premise has been that the geographic
unity of the archipelago -- land and water -- cannot be violated.
Indonesia will not adjust its shelf boundary with South Vietnam
if the compromise involves any suggestion of non-recognition
of the archipelago concept of its territory.* South Vietnam,
although willing to recognize Indonesia's archipelago definition
of its territory as applied to national integrity and security,
will not accept it as a basis for drawing the shelf boundary.
* While only a few countries presently recognize this sovereignty
definition, a modified version of the archipelago concept
may be adopted at the June 2974 LOS Conference in Caracas.
Draft articles were submitted by Indonesia, the Philippines,
Fiji, and Mauritius to the UN's Seabed Committee in August
Z973. They define the use of straight baselines in outlining
an archipelago state, assert the state's sovereignty over its
waters, seabeds, subsoil, and airspace within those baselines,
guarantee the right of innocent passage, and declare the right
of the state to designate sea lanes for the transit of foreign
vessels.
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13. Despite Indonesia's public insistence that the
baselines linking its outermost islands must be used un-
equivocally in negotiating its continental shelf agreements,
Jakarta has in fact been flexible in negotiations with other
countries. Malaysia and Indonesia, for example, in delimiting
the median lines between them, gave only partial weight to
some of the Indonesian islands. The State Department's Office
of The Geographer, in analyzing the Malaysian - Indonesian
shelf boundaries, has pointed out that:
A true equidistant line between the Natuna Islands
and East Malaysia would extend northeastward. The
Natuna Islands, however, have not been assigned
full value as basepoints on the boundary ...As the
boundary projects farther seaward, the islands have
been granted lesser values, even though the more
seaward islands are larger in size than those
closer onshore. The boundary effect gives islands
a decreasing importance which averages almost three-
quarters value. The terminal point has approximately
half effect. Consequently, partial effect ranges
from about half value at the terminus to nearly
full value (86 percent) onshore, to produce a
boundary of apparent equity in a condition in
which islands greatly favor one state.*
The Indonesian Government, however, has offered no such compromise
to South Vietnam.
Negotiations: Progress and Prospects
14. Efforts to resolve the dispute are impeded by the lack
of diplomatic relations between the two countries. Nevertheless,
Indonesian and South Vietnamese negotiators met in Saigon in
June 1972. Jakarta's proposal at that time to adjust its north-
ern shelf boundary a few miles southward was not acceptable to
Saigon. South Vietnamese negotiators then offered to consider
* "Islands: Normal and Special Circumstances," Research Study,
Bureau of Intelligence and Research, RGES-3, December Z0, Z973.
U.
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the Natuna Islands in drawing the median line but only those
less than 24 miles from other Indonesian territory. This
method, however, would have barred consideration of Pulau
Natuna Besar (Great Natuna Island), the largest and most
populous of the Natuna chain, in the construction of a median
line since it lies about 50 miles north of the nearest island
in the Natunas. Saigon's proposed median line would have
split the disputed area into two roughly equal parts. It
was unacceptable to Jakarta because the method still violated
its archipelago principle.
15. Jakarta offered to reopen negotiations in early
1973, but Saigon was preoccupied with preparations for the
first round of bids on its petroleum concession blocks. Talks
were again scheduled for March 1974, but Saigon once more
postponed them, this time for political reasons: South Vietnamese
leaders were rankled by Indonesia's threat to reduce its Inter-
national Commission for Control and Supervision (ICCS) contingent
in South Vietnam and by its vote for attendance by the Viet
Cong's Provisional Revolutionary Government at the Geneva
Convention on the Laws of War.
Precedent for Continental Shelf Divisions
16. Precedents exist in international law to modify
a median line in cases where uninhabited islets are situated
near the median line of a water body or where small, sparsely
populated islands prevent the construction of an equitable
median line on the equidistance principle. A 1966 agreement
between Italy and Yugoslavia, for example, uses a modified
median line that disregards several islets in the Adriatic
Sea. In the 1965 and 1968 agreements between Saudi Arabia
and Iran that define their shelf boundary in the Persian Gulf,
Kharg Island -- off the coast of Iran, 6 square miles in area
and only lightly populated -- was assigned "half weight" in
the shelf division.
Outlook
17. Although seabed allocation in semi-enclosed seas is
on the agenda of the upcoming LOS Conference in Caracas, the
Conference is unlikely to clarify the 1958 guidelines for
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division of the continental shelf among neighboring states.
Settlement of seabed disputes in such cases will be left to
the contending states. Both South Vietnam and Indonesia,
consequently, must modify the criteria for the establishment
of their claims to the shelf if any settlement is to be
reached. The Natuna and Anambas Islands cannot be ignored
as Saigon has done, nor can they be assigned full "mainland"
value as Jakarta has done. The Saudi Arabian - Iran case
and the Indonesian - Malaysian 1969 shelf agreement in which
the Natuna Islands were accorded only "partial weight" offer
some precedent for any future Jakarta - Saigon negotiations.
18. The lack of diplomatic relations, the present political
differences, and the heightened outlook for sizable oil or
gas deposits in the disputed zone combine to cloud the prospects
for fruitful negotiations in the near future. In March 1974
President Suharto decided against any compromise on the con-
tinental shelf beyond that offered in 1972, even though he
realized the risk of military confrontation. South Vietnam,
with encouraging results from seismic surveys in several of
its concession blocks, is probably taking an equally hard
line. An exacerbating factor is the reported AGIP plan to
begin further exploratory drilling in the western half of
the disputed area. The world's energy problems and the ac-
companying rise in petroleum prices are certain to make the
contesting states increasingly covetous of their claim to
the seabed. But, in the long run, reluctance by the oil com-
panies to engage in full-scale exploration or exploitation
in disputed shelf sectors, and thus involve themselves in
Southeast Asian political -- and possibly military -- confron-
tations, will encourage the contesting parties to negotiate
their differences.
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Appendix A
Indonesia - Malaysia Continental Shelf Boundary
in the South China Sea
Western Side - Off the East Coast of West Malaysia
Latitude N
Longitude E
01?23'.9
104?29.5
01?38'.0
104?53'.0
01?54'.4
105?05'.2
02?22'.5
105?01'.2
02?55'.2
104?51'.5
03?50'.1
104?46'.5
04?03'.0
104?51'.9
05?04'.7
105?28'.8
05?40'.6
105?47'.1
06?05'.8
105?49'.2
Eastern Side - Off the Coast of Sarawak
Latitude N
Longitude E
02?05'.0
109?38'.8
03?00'.0
109?54'.5
04?40'.0
110?02'.0
05?31'.2
109?59'.0
06?18'.2
109?38'.6
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Appendix B
Limits of the Continental Shelf of Indonesia in the
South China Sea
Latitude N
Longitude E
07?20'
109?10'
06?52'
109?18'
06?24'
109?22'
06?18.2'
109?38.6
05?31.2'
109?59'
04?40'
110?02'
04?40'
105?14'
05?04.7'
105?28.8'
05?40.6'
105?47.1'
06?05.8'
105?49.2'
06?10'
106?00'
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Appendix C
Limits of the Continental Shelf of
The Republic of Viet-Nam
Latitude
Longitude
8?19'N
104?50'E
8?33'N
105?27'E
9?00'N
105?40'E
9?25'N
106?45'E
10?09 'N
107?06'E
10? 32'N
1080001E
11?00'N
108?36'E
11?00'N
1100001E
7?05'N
110?00'E
5?20'N
107?20'E
7?03'N
103052'E
7?34'N
103?19'E
7?42'N
102?58'E
8? 31'N
1010561E
9?36'N
1010301E
100 09 'N
101027'E
10009 'N
102?58'E
10?03'N
103?31'E
10?22'N
103?41'E
10?29'N
103?45'E
10?31'N
103?45'E
10?31'N
1030471E
10030'N
103?54'E
10?30'N
103?571E
10029'N
104?04'E
10?24'N
104?11'E
10?28'N
1040 20 'E
10?28'N
104?21'E
10014'N
1040221E
10?23'N
104?24'E
10?00'N
104? 31' E
8?36'N
104?31'E
80 26'N
104035'E
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PROJECT PROPOSAL
RESEARCH ACTIVITY NOTICE
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SUBJECT
PROJECT NUMBER
Indonesia - South Vietnam Continental Shelf Dispute
PN 61.2719
25X1A
SUBJECT CODE
REQUESTER Mark Dion, State; OCI
REQUESTING OFFICE
State OCI
STATEMENT OF PROBLEM 25X1A TARGET DATE
A recent reports that a large natural gas deposit, 20 May 1974
has been discovered by an oil company drilling in a South China ANALYST/BRANCH
Sea concession block granted by the Indonesian Government. The
block lies on a sector of the continental shelf that has been GD/EA
claimed by both Indonesia and South Vietnam. Neither country has EST. ANALYST MANHOURS
been willing to compromise on its claim. Indonesia reportedly is
building up its Air Force capability on nearby Natuna Island to 60
signal South Vietnam not to harass offshore drilling activity in
the disputed zone. The U.S. Embassy in Jakarta, as well as State Department
officials in Washington, are fearful that the shelf dispute between the two
countries may be reaching serious proportions. Both State and OCI have expressed
a need for a background paper that would discuss the Law of the Sea issues involved,
including statements on the validity of the shelf claims of both countries. We
propose a brief RP that would highlight these issues. Also, this is the type of
timely item from which a Daily article could be spun-off. (Note: This project
can be done without compromising completion of the Malaysian LOS country study
by the end of the month.) A map showing the Indonesian and South Vietnamese
claims and the petroleum concessions of both countries will be needed.
25X1A
COORDINATION REQUIRED FROM
CD/BI : One map as indicated above
OTHER CIA: OER for information on petroleum drilling activities. 25X1A
NON-CIA : None
DATE CH ie~ DATE 7May74
REPORT RECORD
TITLE
REPORT NUMBER
CIA/BI G
AREA CODE
SUBJECT CODE
PUBLICATION DATE
ANALYST/BRANCH
INITIAL NO. OF COPIES
MANHOURS EXPENDED
CLASSIFICATION
DISTRIBUTION
ANALYST EDITOR
TYPIST
TS
C
STANDARD
A r ved For Releas
2000/05/31 : CIA
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^ SECRET
FORM 2594 R 130DET CL BY 019641 CONFIDENTIAL
 FORM NO. ')'7 Use previous editions
 Approved For Release 0 1 : P 4-00825R0003.00220001-6
NOW
TO ~Pfefl Wk
GEOGRAPHY DIVISION Record of Classification Decision
(Date
I.
Title of report, study, or map: The Indonesia - South Vietnam
Continental Shelf Dispute: Petroleum Politics in the South China Sea
2.
Project No. and Report No. or Map No.:
PN 61.2719 (RP 74-18)
3.
Classification, control, and exempt category:
4.
Confidential/No Foreign Dissem (2) and (3)
Name of classifier:
STATINTL
5.
Rationale for classification and exemption:
Confidential documents were used in research.
A Limdis cable provided much of the
current information; State Department permitted the use of data from it so long.
as it carried a No Foreign Dissem Control.
6.
Sources used in report, study or map which have a bearing on
classification and exemption:
Jakarta A-046, Feb 28, 1972, Confidential
INR Research Study: "Tempest in the China Seas, Capter IV: Enter South Vietnam",
April 26, 1973, Confidential/No Foreign Dissem
Jakarta Cable 4655., 17 April 1974, Confidential Limdis
NOTE: Prepare in triplicate -- one copy
for Branch Project File and two copies
for Division Front Office.
CONTROL or CLASSIFY, according to
content of entries.
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 Approved For Release 2000/05/31-&bQ--RDP84 e2 80001-6
NW E
11
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PROJECT PROPOSAL
1
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RESEARCH ACTIVITY NOTICE
SUBJECT
PROJECT NUMBER
Indonesia-South Vietnam Continental Shelf Dispute
SUBJECT CODE
25X1A
REQUESTER 25X1 A25X1 A
STATEMENT OF PROBLEM TARGET DATE
related to heightened hostility ity between bouth 16 July 1974
Vietnam and Indonesia over their overlapping continental shelf ANALYST/BRANCH
claims. Chief/DDO/EA has expressed an interest in RP-18, The
Indonesia-South Vietnam Continental Shelf Dis ute: Petroleum cnJEA
'
MANHOURS
South China ea, and wises send a co a ong EST. ANALYST
Politics in the
-
with additional information on the dispute Xerox
copies of pertinent State Department documents, along wit copies
of RP 74-12 (East Asian Contested Islands), are being sent to
for forwarding 25X1 A
25X1A 25X1A
COORDI1JATION REQUIRED FROM
CD/BI : None
OTHER CIA: None
NON-CIA : None
APPROVED
DIRECTOR OF BASIC INTELLIGENCE DATE
CHIEF, DATE
REPORT RECORD
TITLE
REPORT NUMBER
CIA./BI G
AREA CODE
SUBJECT CODE
PUBLICATION DATE
ANALYST/BRANCH
INITIAL NO. OF COPIES
MANHOURS EXPENDED
CLASSIFICATION
DISTRIBUTION
EDITOR
TYPIST
TS
C
STANDARD
ANALYST
A r
pip -zP1
qnnnin_s;i_-ti_ r, CIA-
D
9401
0
25X1A
25X1A
FOR M 2594 KX CONFIDENTIAL ^ SECRET
 Approved FoQ eIease 69 fi IA-RDP8$?p0825R000300220001-6
PROJECT PROPOSAL
RESEARCH ACTIVITY NOTICE
SUBJECT
Indonesia-South Vietnam Continental Shelf Dispute
REQUESTER
Self-initiated
A shortened version of the shelf dispute
Research Paper (PN 61.2719) has been prepared
for possible inclusion in the National Intelligence
Daily.
COORDINATION REQUIRED FROM
CD/BI : None
OTHER CIA: None
NON-CIA : None
25X1A
25X1A
PN 61.2719/3
5 June 1974
CHIEF. DATE
East Asia Branch 4Jun7
REPORT RECORD
REPORT NUMBER
TITLE CIA/BI G
AREA CODE SUBJECT CODE PUBLICATION DATE ANALYST/BRANCH INITIAL NO. OF COPIES
MANHOURS EXPENDED CLASSIFICATION DISTRIBUTION
TYPIST TS C STANDARD
ANALYST EDITOR
T S U LIMITED
FORM 2594 USE T PREVIOUS
-74 Approved For Release 2~WPR~T A-R[ Roe o0MOV229 M -6
 CONFIDENTIAL
Approved For F ase 2000/05/31 : CIA-RDP84-0QA25R000300220001-6
.a
U L. J111 'lls-SLE
LARGE GAS DEPOSIT DISCOVERED IN DISPUTED SECTOR
OF SOUTH CHINA SEA CONTINENTAL SHELF
of the archipelago -- land and water -- cannot be violated. South
A large natural gas deposit, estimated to be upto 7 trillion
cubic feet in extent, has been discovered on a 12,000 square nautical
mile sector of the South China Sea continental shelf claimed by both
Indonesia and South Vietnam. The deposit was struck by an Italian
company operating under a production-sharing contract with Indonesia.
Saigon thus far has taken no action. Indonesia, however, has built
up its air force strength and upgraded its air support facilities on
Great Natuna Island, just to the south of the contested sector.
The disputed sector of the shelf lies in waters less than 200
meters deep and, according to provisions of the 1958 Convention on
the Continental Shelf, falls under the jurisdiction of the neighboring
coastal states. The overlap has developed because Saigon and Jakarta
have used different interpretations of the principle of equidistance to
define their claims. The Indonesian Natuna and Anambas island chains
in the South China Sea are the major stumbling block. Indonesia has
drawn a median line to define its northern shelf boundary halfway
between baselines connecting these islands and the territory of
South Vietnam. South Vietnam, however, has disregarded the islands and
drawn its median line halfway between the Vietnam mainland and the large
Indonesian island of Kalimantan.
A major tenet of Indonesia's claim is that the geographic unity
Vietnam - 7 `` 1, 14-" to rec ogn ., T: donesia's archipelago.:: defini tinn.
wa..auy .a.y LIAWMxgta wi.1 dd'b V~aaiYV i v r --~~
InWPM' DMCQ *. Date
bU1] 5$ i) 2 , or (.) (circle one or morO
Approved For Release D /D 1 CIA-RDP84 -5O .?002 0 -&d on
schedule of E.O. iIG32, e -..9i3tton category:
Exempt from general declassification
to rPnnen negotiations have been twice deferred.
1972 to settle the dispute were unsuccessful, and subsequent efforts
Jakarta has offered no such compromise to Saigon. Attempts in June
Sea islands without adhering rigidly to Indonesia's archipelago limits.
drew the median lines between Malaysia and the Indonesian South China
negotiations with other countries. Malaysia and Indonesia, for example,
Indonesia's insistence that baselines linking its outermost islands
must be used unequivocally, Jakarta has shown flexibility in its shelf
not accept it as a basis for drawing the shelf boundary. Despite
of its territory as applied to national integrity and security, will
 PnDmnr MTIAI
Approved For Release 201
NO FOREIGN RI SE
The Law of the Sea Conference slated to convene in Caracas in
June is unlikely to amplify on the 1958 guidelines for division of the
continental shelf among neighboring states. In March 1974 President
Suharto decided against any compromise on the continental shelf beyond
that offered in 1972, even though he realized that military confrontation
might be risked. South.Vietnam, with encouraging results from seismic
surveys in concession blocks granted in the past year, is probably
taking an equally hard line. Reluctance by the oil companies to
engage in full-scale exploration or exploitation operations in disputed
shelf sectors may, however, encourage the contesting parties to
negotiate their differences.
CONFIDENTIAL
NO FOREIGN DISSEM .
For Rel 2001 :CIA RRI
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PROJECT PROPOSAL
RESEARCH ACTIVITY NOTICE
Ill
s
SUBJECT
PROJECT NUMBER
Indonesia-South Vietnam Continental Shelf Dispute
P 61.271912
SUBJECT CODE
RE 25X1 A
REQUESTING OFFICE
OCI
STATEMENT OF PROBLEM TARGET DATE
A condensed version of the Indonesia-South
Vietnam shelf dispute RP (PN 61.2719) has been 5 Ju
ANALYST/BR
requested by OCI for use in their "Developments ANCH
in Indochina" publication.
GD/EA
25X1 A EST. ANALYST MANHOURS
COORDINATION REQUIRED FROM
CD/BI None
OTHER CIA: None
25X1 A
NON-CIA: None
XX XX X
CHIEF, East Asia Bran DATE 4Jun7 .
REPORT RECORD
TITLE
REPORT NUMBER
CIA/BI G
AREA CODE
SUBJECT CODE
PUBLICATION DATE
ANALYST/BRANCH
INITIAL NO. OF COPIES
MANHOURS EXPENDED
CLASSIFICATION
DISTRIBUTION
ANALYST
EDITOR
TYPIST
TS
C
STANDARD
S
U
LIMITED
FRM REV
1074 2594 EDITIONSIOUS
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 -`_J ~~ll 77
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SOUT_ H VIETNAM - INDONESIA
25X1A
Potential Gas Clash
(x3057)
A large natural gas deposit estimated at 7 tril-
lion cubic feet was discovered in April on a 12,000-
square-nautical-mile sector of the continental shelf
in the South China Sea. The deposit--in the ' eastern
part. of a sector claimed by both Indonesia and South
Vietnam--was located by AGIP, an Italian petroleum
company operating under a production-sharing contract
with the Indonesian government. Saigon has only re-
cently learned of the strike, and any plans to begin
further exploratory drilling may provoke some strong
South Vietnamese objections. In a show of force, In-
donesia has upgraded its air combat facilities near
the area..
Indonesian and South Vietnamese officials met in
Saigon in June, 1972 to negotiate the shelf dispute,
but attempts to reach a suitable compromise were un-
successful. Jakarta offered to reopen negotiations
in early 1973, but Saigon sought and obtained a post-
ponement until March 1974. At that time Saigon
stalled again--apparently for political reasons: South
Vietnamese leaders were rankled by Indonesia's threat
to reduce its peace-keeping contingent and by its vote
to support the attendance of the Viet Cong's Provi-
sional Revolutionary Government at the Laws of War Con-
vention in Geneva.
The Law of the Sea Conference in Caracas this
month is unlikely to set forth any new guidelines by
which Saigon and Jakarta can reach an agreement on
the continental shelf. Consequently, either or both
will have to modify their claims if any settlement is
to be reached. The lack of diplomatic relations be-
tween the two countries, their present political dif-
ferences, and the heightened outlook for sizable oil
June 4, 1974
-5-
SECRET
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 Approved For elease 2000/0 / ?:] rIA-RDP84agO825R000300220001-6
en al Shelf Clams and Petroleum coancessions
T 5-1
Cambodia
it ' U t
T Ti cirand
Boundary of
South Vietnam's
continental shelf
claim
Surna t ara
502269 5-74 CIA (540886)
S'ea
CONFIDENTIAL
CONFIDENTIAL
South
Vietnam
`Union Texas, Skelly, Conzinc Riotinto = .i
(Rust.)
Marathon, Sun,
Amerada Ness 1.4 co
00
f18 o
Continental-
Getty
Concessions granted by South
Vietnam in 1974
Concessions granted by South
Vietnam in 1973
Concessions granted by Indonesia
Concessions granted by Malaysia
Indonesia-Malaysia continental
shelf boundary
Gh.in,a
Sea
cla,ra zd sY ni ssu
Exemyf Irain gene,al
dzclass.iiia!ion srhadule of E 0. 11652
t_'Plh_n Category 5O :', i0.01
Oeclos colinn dale impossible to derr..nine~
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 Approved For Release 200
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or gas deposits in the disputed zone combine to cloud
the prospects for fruitful. negotiations in the near
future.
The world's energy problems and the accompanying
rise in petroleum prices is certain to make the con-
testing states increasingly covetous of their claims
to the seabed. In March 1974, President Suharto de-
cided against any further compromise despite the possi-
bility of confrontation with Saigon. South Vietnam,
with preparations underway to begin exploratory drill-
ing this summer, probably will take an equally hard
line. Reluctance by the oil companies to engage in
full-scale exploration in the disputed shelf sectors,
however, may ultimately force the two countries to ne-
gotiate their differences. (CONFIDENTIAL NO FOREIGN
DISSEM)
June 4, 1974
-7-
SECRET
Approved For Release 2000/05/31 : CIA-RDP84-00825R000300220001-6
 CONFIDENTIAL
Approved For Rel a
0 + :P84-0Q25R000300220001-6
YPOP
LARGE GAS DEPOSIT DISCOVERED IN DISPUTED SECTOR OF.
SOUTH CHINA SEA CONTINENTAL SHELF
An April 1974 cable from the U.S. Embassy Jakarta reported
that a large natural gas deposit, estimated to be up to 7 trillion
cubic feet in extent, had recently been discovered on a 12,000
square nautical mile sector of the South China Sea continental
shelf claimed.by both Indonesia and South Vietnam. The deposit
was struck in. the eastern part of the disputed sector by AGIP,
an Italian petroleum company operating under a production-sharing
contract with the Indonesian Government. South Vietnam has only
recently learned of the strike. Although there are as yet no
indications that Saigon will take any action against the AGIP
operation, AGIP's plans to begin further exploratory drilling
in the western part of the disputed area may precipitate a
reconnaissance mission by the Vietnamese Navy. Indonesia,
perhaps wary of an incident similar to the South Vietnam - PRC
clash over the contested Paracel Islands in early 1974, has.
built up its Air Force strength and upgraded its air support
facilities on Great Natuna Island, just to the south of the
contested zone.
The sector of the continental'shelf claimed by both Indonesia
and South Vietnam lies in the shallow southwestern part of the
South China Sea, everywhere less than 200 meters deep. Seabeds
lying at depths less than 200 meters, according to provisions
pf the 1958 Geneva Convention on the Continental Shelf, fall
under the jurisdiction of the neighboring coastal states. The
Convention's lack of adequate guidelines for the allocation of
the seabed among coastal states coupled with the promise of
large oil and gas deposits under the seabed has led to conflicting
continental shelf claims in the southwestern South China Sea -
Gulf of Thailand region. South Vietnam's. claim overlaps not
CONFIDENTIAL
NO FOREIGN DISSEM
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 CONFIDENTIAL
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only the sector of the shelf claimed by Indonesia in the south but
sectors claimed by Thailand, Malaysia, and Cambodia in the west
as well.
Because of the advanced stage of its offshore petroleum
operations and its desire to avoid haggling over seabed resources
jurisdiction, Indonesia has been in the forefront among Southeast
Asian nations in negotiating its continental shelf boundaries.
Between 1969 and 1972 agreements with Malaysia, Thailand, and
Australia were signed and ratified. A 1971 Presidential Decree
outlined the northern perimeter of the Indonesian claim in
the South China Sea. The Decree, issued only 1 month after
South Vietnam had issued a decree establishing its South China
Sea shelf claim, outlined precisely the 12,000 square miles of
conflicting claims and set the stage for abortive negotiations
in 1972.
South Vietnam's claim was divided into petroleum concession
blocks in mid-1973 and agreements were signed with four foreign
oil companies to explore and exploit in eight of them. Two of
the awarded blocks extend into the area of the shelf claimed by
Indonesia. Ten more blocks were granted to six bidders in late
May 19,74 with small parts of two of them also extending into the
disputed sector.
Most continental shelf boundaries have been based on
..priniP1es established in the 1958 Geneva, Convention on the
Continental Shelf which calls for the use on an equidistance
principle in the absence of other provisions. But the presence
of the Indonesian Natuna and Anambas island chains in the South
China Sea precludes an easy division of. the South Vietnam - Indonesian
shelf based on this principle. South Vietnam, in its unilateral
claim, has disregarded these islands and drawn a median line
halfway between the Vietnam mainland and a baseline joining
Kalimantan and Bangka (a large island off the east coast of
CONFIDENTIAL
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 U 3NMUt1l I UUL
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Sumatra). Indonesia, on the other hand, has drawn a median
line from baselines connecting the Natuna and Anambas Islands.
Perhaps to give added credibility to the use of its own islands
in drawing its shelf boundary, however, Indonesia, appears to
have drawn the median line halfway between these islands and
baselines extending from the South Vietnam coast to Con Son,
about 50 miles off the coast.
In.its shelf negotiations with Malaysia, Thailand, and
Australia, Indonesia's premise has been that the geographic
unity of the archipelago -- land and water -- cannot be violated.
South Vietnam, although willing to recognize Indonesia's
archipelago definition of its territory as applied to national
integrity and security, will not accept it as a basis for drawing
the shelf boundary. Despite Indonesia's insistence that baselines
linking its outermost islands must be used unequivocally in
negotiating its continental shelf agreements, Jakarta has been
more flexible than its officials publicly admit in negotiations
with other countries. Malaysia and Indonesia, for example,
drew the median lines between Malaysia and the Indonesian South
China Sea islands with great flexibility. Indonesia has offered
no such compromise to South Vietnam.
Indonesian and South Vietnamese officials met in Saigon
in June 1972 to negotiate the shelf dispute but offers of compromise
by both sides were rejected by the other. Jakarta offered to
reopen negotiations in early 1973 but Saigon's preparations for
the first round of bids on its petroleum concession blocks
apparently were responsible for a postponement until March 1974.
Saigon once more deferred them, this time apparently for political
reasons: South Vietnamese leaders were rankled by Indonesia's threat
to reduce its ICCS contingent in South Vietnam and its vote for
attendance by the Viet Cong's Provisional Revolutionary
Government at the Geneva Convention on the Laws of War.
CONFIDENTIAL
O E DISSEM
t~0 F
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 Approved For ReJ. ase 2000/ MlAplffl
I?MP84-OQV5ROO0300220001-6
NO FOREIGN DISSEM
The Law of the Sea Conference slated to convene in Caracas
in June is unlikely to amplify on the 1958 guidelines for
division of the continental shelf among neighboring states. Both
South Vietnam and Indonesia, consequently, must modify their
criteria used in the determination of their claims if any
settlement is to be reached. The lack of diplomatic relations
between the two countries, the present political differences,..,
and the heightened outlook for sizable oil or gas deposits in
the disputed zone combine to cloud the prospects for fruitful
negotiations in the near future. In March 1974 President
Suharto decided against any compromise on the continental shelf
beyond that offered in 1972, even though he realized that military
confrontation might be risked. South Vietnam, with encouraging
results from seismic surveys in several of its uncontested
concession blocks and preparations underway to begin exploratory
drilling this. summer, is probably taking an equally hard line.
The world's energy problems and the accompanying rise in petroleum
prices is certain to make the contesting states increasingly
covetous of their claim to the seabed. But, in the long run,
reluctance by the oil companies to engage in full-scale
exploration or exploitation operations in disputed shelf sectors
in. the region and get involved in Southeast Asian political --
and possibly military -- confrontations, will encourage the
contesting parties to negotiate their differences.
Approved For Release 200=#IQNA P84-00825R00030022.0001-6
!innR n