ONGCs Vietnam foray illegal, says China

Written by Anupama Airy | New Delhi, Dec 2 | Updated: Dec 3 2007, 05:10am hrs
Indias quest for energy security is in rough weather after China termed ONGCs current exploration in two offshore deepwater Vietnamese blocks as illegal.

A dmarche by the Chinese Deputy Chief of Mission in New Delhi on the contract ONGC and the Vietnamese government made for exploration in blocks 127 and 128 says the two blocks fall in the disputed area of the South China Sea.

A dmarche is a formal diplomatic representation of a government s official position.

In a November 22 letter to the petroleum ministry, ministry of external affairs joint secretary Biren Nanda said, According to the Chinese diplomat, no countries apart from the disputant parties are involved in such activities (exploiting hydrocarbon resources) in the area.

The Chinese government regards any such activity by third countries involving exploitation of petroleum resources in the Nansha islands and nearby waters as illegal unless they are undertaken with its express permission.

According to the Chinese demarche, American and Russian companies have stopped their exploration activities in the disputed areas and China is engaged with the Philippines and Vietnam in joint exploitation of resources in these waters, Nanda said.

The Chinese objections are a setback to ONGC as the Indian upstream major has already committed investments close to $100 million for exploration in these blocks. ONGCs foreign arm ONGC Videsh had won a contract from the Vietnamese government for exploration in the two Phu Khanh basin blocks in 2005-6.

Production-sharing contracts for offshore blocks 127 and 128, both located at a depth of more than 400 meters, were signed by ONGC Videsh in 2006. In the event of a commercial discovery made in the two areas, Vietnams national oil company Petro Vietnam will have the option to pick up a 20% interest.

The ministry of external affairs has asked the petroleum ministry to make urgent enquiries with ONGC to ascertain the facts and suggest an appropriate response to the demarche from the Chinese embassy in New Delhi. When contacted, ONGC chairman RS Sharma and ONGC Videsh MD RS Butola, however, said they were yet to hear from the government on this issue.

Regional territorial disputes are an impediment to developing some of Vietnams offshore petroleum resources. The hydrocarbon potential off the Spratly Islands in the South China Sea and competition for extra energy reserves recently re-ignited a ownership feud between China and Vietnam.