Though sometimes overlooked, natural gas might be the most abundant hydrocarbon resource in the South China Sea. Most of the hydrocarbon fields explored in the South China Sea regions of Brunei, Indonesia, Malaysia, Thailand, Vietnam, and the Philippines contain natural gas, not oil. Estimates by the U.S. Geological Survey and others indicate that about 60 to 70 percent of the region's hydrocarbon resources are natural gas.

At the same time, natural gas usage among developing Asian countries is expected to rise by about 4.5 percent annually on average through 2025 -- faster than any other fuel -- with almost half of this increase coming from China. If this growth rate is maintained, demand will exceed 21 trillion cubic feet (Tcf) per year - nearly triple current consumption levels -- by 2025. Natural gas consumption could increase even faster if additional infrastructure is built. Proposals have been made to link the gas producing and consuming regions of the Pacific Rim region of Asia by pipeline, with the South China Sea geographically central to these regions.

Malaysia is not only the biggest oil producer in the region, it is also the dominant natural gas producer as well, and until recently has been the primary source of growth in regional gas production. The development of natural gas resources outside of Malaysia has been hampered by the lack of infrastructure. Despite this constraint, natural gas exploration activity elsewhere in the region has been increasing. Much of this new activity had occurred in the Gulf of Thailand, offshore China, in Indonesia around the Natuna Islands, and in Vietnam in the Nam Con Son basin southeast of Vietnam.

As with oil, estimates of the South China Sea's natural gas resources vary widely. One Chinese report estimates that there are 225 billion barrels oil equivalent of hydrocarbons in the Spratly Islands alone. If 70 percent of these hydrocarbons are gas as some studies suggest, total gas resources (as opposed to proved reserves) would be almost 900 Tcf. If the rule of thumb for frontier areas were applied to these resource levels, the Chinese estimates would imply potential production levels for the Spratly Islands of almost 1.8-2.2 Tcf annually (at common natural gas reserve/production ratios in the region of 40-50). The entire South China Sea has been estimated by the Chinese to contain more than 2,000 Tcf of natural gas resources. As with oil, China's optimistic view of the South China Sea's natural gas potential is not shared by most non-Chinese analysts.

The bulk of the world's LNG trade passes through the South China Sea, and LNG shipments through the Sea to Northeast Asian Markets constituted well over half of the world's LNG trade in 2001. Japan is by far the world's largest consumer of LNG, with shipments to South Korea (the world's second largest consumer of LNG) and Taiwan (the world's fifth largest consumer of LNG) accounting for most of the remaining shipments through the Sea.