To Japan, they are the Senkaku Islands. China calls them the Diaoyu Islands. This small group of uninhabited islets has been at the centre of the disputed maritime territory in the East China Sea since the late nineteenth century.

Japan annexed the islands, along with Taiwan, at the end of the first Sino-Japanese War in 1895, and placed them under the administration of the Okinawa Prefecture to the south of the mainland. At the turn of the last century, entrepreneur Koga Tatsushiro was licensed by the Japanese authorities to establish a small bonito fish-processing plant with 200 employees. However, this failed in 1940 and the islands were placed under US control during the Second World War until 1972 when they were bought by another Japanese entrepreneur, Hiroyuki Kurihara.

The Kurihara family had been leasing three of the five islets to the Japanese Government for JPY25m ($220,000) per year until 2012, when the government bought the islands outright for JPY205bn ($18.1m). The news quickly spread to Beijing, resulting in tens of thousands of Chinese protesters taking to the streets outside the Japanese embassy.

Offshore drilling first caused tension between the two governments in 2003, when Chinese oil companies established a production platform at the Chunxiao gas field near the Japanese maritime border. This was met with suspicion by the Japanese Government, who requested geological proof that China was not tapping into Japan’s reserves.

When the demand was rejected, Tokyo launched its own exploration efforts, sending a seismic survey ship to the maritime border zone in July 2004. China retaliated by deploying naval surveillance vessels to harass the survey ship, and later in November, a Chinese submarine was spotted in Japan’s territory. By January 2005, China had stationed two destroyer ships in the disputed zone.

GlobalData upstream analyst Daniel Rogers says: “Over recent years tensions have begun to rise over the disputed offshore area between Japan and China within the East China Sea. Reigniting previous area disputes that arose in 2004 when a Chinese drilling platform was discovered by Japanese authorities just 5km away from the proposed boundary.”

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China’s operations in the East China Sea

The US Energy Information Administration estimates that the East China Sea contains around 200 million barrels of oil (mmbbl), and between 30 and 60 billion cubic feet (bcf) of natural gas. This is enough energy to meet Japan’s average oil demand for two months and its gas needs for six months. For China, it represents a much smaller proportion of national demand.

China has continued its operations in the disputed zone, deploying it latest jack-up drilling rig in waters at the northern end of its oil and gas platforms. Last year, China installed a further three jack-up rigs in the area – Haiyang Shiyou 942, Kantan Qihao, and Kaixuan Yihao – and now operates 14 wellhead platforms near the median line.

The Kantan Qihao and Kaixuan Yihao platforms have since disappeared from the AIS tracking system, and Haiyang Shiyou 942 has also left the area, although the Asia Maritime Transparency Initiative cannot confirm whether a wellhead platform was subsequently constructed.

“Recent reports have revealed that there are a growing number of Chinese oil and gas exploration and drilling rigs entering the controversial area. Flaring has been seen from satellite imagery indicating that Chinese production is ongoing. GlobalData’s research indicates that there are a further 14 discovered fields that have yet to start production,” says Rogers.

“The China National Offshore Oil Corporation (CNOOC) is the main player in the East China Sea area and produced 22.3 bcf of natural gas and 1.6 mmbbl of oil in 2017. From 2013 to 2017, CNOOC’s production in the area has increased by approximately 260%, signifying a push in investment and interest in the area from the company despite ongoing clashes.

“The production represents just 1% of CNOOC’s total production and the East China Sea area accounts for 2.8% of CNOOC’s total reserves for 2017. To date, no production has been reported from fields on the Japanese side of the border.”

Commenting on the move in 2017, Japanese chief cabinet secretary Yoshihide Suga said in a news conference said that “it is extremely regrettable that China continues its unilateral development in the sea area in a situation where the maritime boundary between Japan and China has not been fixed in the East China Sea.”

In response, the Chinese foreign ministry told Associated Foreign Press in a statement: “China’s oil and gas activities in the East China Sea are all located in maritime areas indisputably under Chinese jurisdiction. The so-called issue of ‘unilateral exploitation’ does not exist.”

Japanese drilling efforts remain relatively low

There is some evidence to suggest that there could be a higher level of undiscovered reserves in the East China Sea.

Rogers explains: “Despite the relatively low level of current production and discovered resources, the existing fields prove a working petroleum system is in place. Both countries are interested in the East China Sea for the potential resources in an effort to fuel their growing economies and reduce reliance on more costly imports from other regions.

According to Rogers, the reason why China’s drilling efforts are heightened compared to Japanese efforts could be down to simple logistics.

“The more aggressive push by the Chinese to develop the resources in the East China Sea likely stems from a number of reasons, including suppling cheaper and cleaner energy to cities on the East coast such as Shanghai and reinforcing China’s territorial claims in the area,” he says.

“The technical and financial challenges of extraction and transportation of hydrocarbons from the area to mainland Japan likely contributes to why the Japanese have been less active in the exploitation of the areas resources.”

Prospects for cooperation?

There has been some talk over the years regarding joint efforts by China and Japan to coordinate drilling operations in the East China Sea.

“In 2008, a Joint Development Area agreement was drawn up between Japan and China of an area spanning 2,700 square kilometres along the disputed boundary, however to date both parties still interpret the agreement in different ways,” adds Rogers.

Now, both nations have been ramping up their military presence in the East and South China Seas, spurred on by Japan’s annexation of the Senkaku/Diaoyu islands in 2012.

Last month, Japanese defence minister Itsunori Onodera claimed that China “is unilaterally escalating its military activities in the sea and aviation spaces around our country,” according to Press TV, adding that it is a significant concern for Japan’s Ministry of Defence.

Beijing has been conducting new air force operations near to Japan’s maritime border and also paraded a nuclear submarine near the disputed islets, over which it claims to have ‘indisputable sovereignty’.

On 11 October, Japanese think tank Genron NPO published its opinion poll results in the Japan-China Joint Opinion Survey 2018, finding that the number of Chinese respondents who view Japan as a military threat rose from 67.6% to 79.4% since last year. Similarly, 57.5% of Japanese respondents perceived China as a military threat, up from 45.3% last year.

The poll found that while 42.2% of Chinese participants viewed Japan in a positive light, only 13.1% of Japanese respondents echoed this sentiment about China.

Despite increased militarisation, both countries say they are keen to meet a political détente, and Japanese Prime Minister Shinzo Abe visited Beijing at the end of October to celebrate 40 years of the 1978 Treaty of Peace and Friendship between the two nations.

China’s foreign ministry spokesperson Lu Kang said it would “elevate our bilateral ties and put bilateral cooperation back on the right track.”

Commenting on the state visit, Abe said at the Eastern Economic Forum in Russia last month: “Through this exchange of visits at the leaders’ level, I hope to raise Japan-China relations to a new stage. I am firmly determined in this regard.”