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South China Sea exploration plans stoke Chinese fire

China has slammed joint upstream exploration between India and Vietnam in a hotly disputed area of the South China Sea

OIL and gas companies with acreage off the east coast of Vietnam are continuing exploration activities, despite warning shots from China over sovereignty claims.

A recent report in the People’s Daily, the mouthpiece of China’s ruling Communist Party, said oil and gas exploration between Indian and Vietnamese state-owned firms west of the disputed Spratly islands put at risk the two countries’ relations with their chief trading partner.

The report claimed that if Vietnam and India pursued any joint interest that damaged relations with China, as well as the stability and peaceful economic development of the entire South China Sea region, the losses will outweigh the gains.

The statement by the Chinese government coincided with a visit to Vietnam by Indian foreign minister SM Krishna, who reacted by stating that India’s exploration plans offshore Vietnam remained unaffected. India plans to further deepen its energy ties with Vietnam as an important aspect of economic co-operation.

Analysts say India’s increased engagement with Vietnam is partly in response to Chinese projects boosting its presence in south Asia, particularly in port construction.

Territorial claims

China’s territorial claims extend all the way along Vietnam’s east coast and dissect exploration blocks that have been awarded in the Song Hong, Phu Khanh and Nam Con Son basins.

India’s foreign office recently said that Indian companies, including the overseas arm of state-owned ONGC – ONGC Videsh – and privately owned Essar Oil, were expanding energy co-operation with Vietnam. ONGC Videsh has one exploration permit, Block 128, in the Phu Khanh basin, off central Vietnam. It plans to drill its first exploration well next year.

Elsewhere, US supermajor ExxonMobil is drilling in one of its three permits in the Phu Khanh basin; while Australian independent Santos is drilling in Block 123. Further north, in the Song Hong basin, Salamander Energy has just finished drilling in Block 101-100/04, while Premier Oil is set to probe Block 104-109/05. Other companies operating in the Phu Khanh basin include, Origin Energy, Chevron, Plains Exploration and Neon Energy.

Conflicting claims

China has made the largest claims over the South China Sea, which is believed to be rich in oil and gas deposits, while, Taiwan, Vietnam, Brunei, Malaysia and the Philippines also assert territorial sovereignty. Expectations for the hydrocarbons potential of under-explored areas of the sea tend to heighten perceptions of their strategic significance. China’s claim is based on what it says it indisputable sovereignty since ancient times.

But Vietnam says that any view opposing co-operation on Vietnam’s continental shelf and within its 200 nautical mile exclusive economic zone is completely devoid of legal basis and worthless.

Eventually, analysts expect exploration to be allowed in the most disputed parts of the South China Sea, not through military conflict, but bi-lateral or multi-party agreements. Any mutual agreements between claimant countries will likely take some time to achieve, however.

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