Natural Gas JV Project - Japan & China?

By Michiyo Nakamoto in Tokyo and Mure Dickie in Beijing

Published: June 17 2008 03:00 | Last updated: June 17 2008 03:00

Tokyo and Beijing appear close to agreement on joint development of natural gas fields in disputed waters of the East China Sea. A deal would resolve one of the most contentious issues to strain Sino-Japanese ties in recent years.

The countries agreed over the weekend to accelerate negotiations about how they might jointly develop the gas fields, Japan's foreign ministry said.

Nobutaka Machimura, Japan's chief cabinet secretary, said the discussions were in their last stages. Japanese media said the announcement of a deal could come this week.

Joint development of energy resources in the East China Sea has become a test-case issue for the diplomatic rapprochement between Beijing and Tokyo.

The lingering dispute over gas extraction in the area stems from divergent claims regarding the extent of the neighbours' exclusive economic zones.

Tokyo says its zone extends to a median line between the two countries, while Beijing, basing its claim on its continental shelf, says its zone stretches much closer to Japan.

The two sides failed to meet a self-imposed deadline for a deal on joint gas exploration and extraction last year but said during a landmark visit to Japan by Hu Jintao, the Chinese president, last month that a deal was in sight.

"Prospects for settling the dispute are already in view and I'm happy about this," Mr Hu said during his visit.

The Japanese foreign ministry said that Masahiko Komura, foreign minister, and his Chinese counterpart Yang Jiechi had agreed at the weekend to accelerate talks to resolve the dispute "as soon as possible". However, there could be no agreement until details were settled, the ministry said.

China's foreign ministry and Chinese state oil companies that have interests in the East China Sea declined to comment.

Estimates of how much gas is available in the East China Sea have varied widely but Chinese and -Japanese dependence on imported energy has added to the sensitivity of the dispute over extraction rights.

Recent disagreement has centred on the Chunxiao gas field, which lies within China's EEZ but just a few kilometres from the median line. Chinese development of the field has prompted complaints from Tokyo that gas could be drawn from its side of the line.

Analysts have said that a key obstacle to agreement on joint development is the desire of officials on the two sides not to allow a deal to weaken the territorial claims on which their EEZs are based. But agreement on the issue would show that Beijing and Tokyo's newly amicable leaders can go beyond warm rhetoric to tackle substantive issues.