'Just how much oil and natural gas is at stake, in either the South China or the East China Sea, is unclear. The territorial disputes have prevented any reliable survey. One Chinese estimate puts the oil stores in the South China waters at 213 billion barrels, an amount that would exceed the proved reserves of every country except Venezuela (296.5 billion barrels at the end of 2011) and Saudi Arabia (265.4 billion barrels). That's about ten times higher than a U.S. Geological Survey estimate from the mid-1990s—but even that lower figure puts the South China Sea's oil potential at four or five times that of the Gulf of Mexico. (Related Quiz: "What You Don't Know About World Energy") Similarly, China estimates that one of the world's largest natural gas deposits, containing some 250 trillion cubic feet, lies all but untapped in the East China Sea. U.S. energy analysts reckon the "proven and probable" reserves there at only 1 to 2 trillion cubic feet—much less than the Gulf of Mexico, but still considerable.
The U.N. Convention on the Law of the Sea gives countries the right to an exclusive economic zone extending 200 nautical miles from their coasts. In the seas off China and Southeast Asia, this rule leads to many overlapping claims, which in theory must be negotiated by the parties. China has been producing natural gas since 2006 from the Chunxiao gas field, located near a median line between the two nations that Japan has proposed (but China has rejected) as a maritime boundary. Japan suspects China is siphoning gas from Japan's side of the median. Those fears are fanned by China's refusal to share its seismic data.
The Senkaku/Diaoyu islands lie southwest of that gas field, near Taiwan—which also claims them. Whichever country gets the islands would see its claims bolstered not only to Chunxiao gas, but also to untapped petroleum reserves that are believed to lie around the Senkakus and beyond. Japanese nationalists such as Shintaro Ishihara, who stepped down as governor of Tokyo this week to form a new political party, say the current national government has not acted aggressively enough against China. Earlier this year Ishihara began raising private money to take over and develop the islands as a way of cementing the Japanese claims.
The eight uninhabited islands, covering 7 square kilometers in all (2.7 square miles), already are part of Okinawa, Japan's southernmost prefecture. But until this year several of the islands were owned privately by a single family. To forestall Ishihara's gambit and avoid antagonizing China, the Japanese government announced in September that it had purchased those islands for about $30 million and would not develop them. Instead of mollifying the Chinese, the move only inflamed them. Vice President Xi Jinping, in line to become Communist Party chief next month and ultimately China's president, called Japan's action "a farce"—an epithet that could easily be applied to the riots, naval exercises, and diplomatic dealings that followed, were the stakes not so high.'