Malaysia is broadening its search for new oil and gas clusters under its waters in the South China Sea despite China continually pushing to stop those activities with terse diplomacy and by dispatching hulking vessels to hover near drilling operations, a U.S. think-tank says.

But Beijing may step up the pressure, as Malaysia’s state-owned exploration firm, Petronas, goes farther afield within the country’s waters that China also claims, the Asia Maritime Transparency Initiative (AMTI) said in a brief published Tuesday.

“Despite the CCG’s efforts, Malaysia has not only continued its existing oil and gas operations, it has also expanded exploratory activity,” said the brief by AMTI, a program of the Center for Strategic and International Studies in Washington.

“However, with Malaysia’s expanding drilling … Beijing could ratchet up the pressure on Malaysian hydrocarbon production.”

CCG refers to the China Coast Guard; one or more of its vessels permanently patrol in Malaysia’s exclusive economic zone (EEZ).  In its note in February, China urged Malaysia to halt its offshore oil and gas activities near Luconia Shoals.

In June, Petronas signed a production sharing contract with another firm for a gas discovery cluster comprising the Nosong, Bongawan North and Epidot fields, which is situated off the Sabah coast. Unlike many of the firm’s other properties, this one is much closer to the contested Spratly Islands.

AMTI said that while the CCG presence may be continuous at Luconia Shoals, it does not come close to the dozens of coast guard and hundreds of militia ships Beijing has deployed farther north in the Spratlys.

Malaysia has drilled 15 exploratory wells so far this year, and 23 last year, which was the most since 2015, according to the Southeast Asian nation’s Marine Department. 

AMTI described 2023 as a “banner year,” because Malaysia made 19 discoveries and had two appraisal successes, which together amounted to more than 1 billion new barrels of oil equivalent in offshore resources.

All these activities were conducted as Chinese coast guard ships patrolled around the Luconia Shoals, off the coast of the Malaysian state of Sarawak in Borneo.

The shoals are 100 kilometers (52 nautical miles) off the Malaysian coast and within its exclusive economic zone (EEZ), where Kuala Lumpur has jurisdiction over natural resources and state company Petronas has been operating for years.

An EEZ is typically 200 nautical miles (370 km) from a country’s shoreline and the coastal country has jurisdiction over natural resources in the waters and the seabed.

“From January 1 through September 30, AMTI found nine different CCG vessels that spent time patrolling in Malaysia’s exclusive economic zone and continental shelf,” the report said.

“At least one CCG vessel was on station nearly every day, remaining in the area for up to six weeks before being relieved by another ship.”

AMTI further said these Chinese vessels often come within 1,000 meters of key gas platforms Petronas operates, which are all located near the shoals.

China claims nearly the entire South China Sea, including waters within the EEZs of Taiwan and ASEAN member-states Brunei, Malaysia, the Philippines and Vietnam. 

In 2016, a U.N. arbitration court ruled that China’s nine-dash line, a boundary used by Beijing on Chinese maps to demarcate its claim, was invalid. But Beijing has rejected the ruling and last year published a map with a new 10-dash line with new boundaries to waters they claim.

BenarNews contacted Petronas to ask how it dealt with increased activity by Chinese ships near its drilling sites but did not immediately hear back. BenarNews similarly did not hear back from the foreign ministry. 

‘Our economic survival’

But Prime Minister Anwar Ibrahim openly addressed the issue last month, after none of his officials said that a Philippine Daily Inquirer  report with details of the leaked note from China to Malaysia was untrue.

In the note, China accused Malaysia of infringing upon its sovereignty at the Luconia Shoals. It also expressed “serious concern” and “strong dissatisfaction” over Malaysia’s oil and gas exploration projects in the area and asked it to immediately stop those activities.

Malaysia’s Anwar said all exploratory operations were taking place within Malaysia’s waters.

“We have made it clear that what we are doing with oil exploration is within our own waters,” he said at a Sept. 5 event in Russia.

“We’ve explained that we must proceed as it concerns our economic survival.”

Meanwhile, tensions between China and the Philippines have increased over the contested Sabina Shoal.

Rival South China Sea claimants needed to “prioritize peaceful coexistence,” Malaysia’s Foreign Minister Mohamad Hasan said during a speech at the U.N. General Assembly last week.

“We must not allow the situation to become dominated by growing distrust,” he said. 

“This benefits no one. It only further undermines security, and destabilizes global trade. … They “must collectively pursue a different vision.” 

‘Creeping expansionism’

Stanford University analyst Ray Power said that the CCG presence at the Luconia Shoals would increase as Beijing continues to try to enforce its claims or succeeds in some areas.

“Over the long term Malaysia will gradually see more ships in its EEZ as the size of China’s coast guard and militia fleets grow to support its creeping expansionism,” Powell, director of the SeaLight maritime initiative at the university, told BenarNews.

According to foreign policy analyst Shahriman Lockman, China’s coast guard patrols were unlikely to stop Malaysia’s energy exploration, at least for now. 

“We have long reached a kind of equilibrium in interactions between Malaysia and China,” Shahriman, a senior analyst with the Institute of Strategic and International Studies (ISIS) Malaysia, told BenarNews.

He said China continued to assert its claims and send its vessels to Malaysia’s EEZ, while the Southeast Asian country keeps drilling in those waters.

“This is primarily why Malaysia prefers a quiescent approach to overlapping claims and this will continue as long as Malaysia can keep drilling,” he said.

“Whether this approach is sustainable is open to debate.”