India’s ONGC Will Continue to Explore Offshore Vietnam, Much to China’s Discontent

NEW DELHI–India’s state-run Oil & Natural Gas Corp. (500312.BY) will continue to explore for oil and gas offshore Vietnam in the South China Sea, ignoring objections from China.

ONGC Videsh Ltd., the overseas investment arm of ONGC, has accepted Vietnam’s proposal to stay invested in Block 128 as Hanoi has offered additional data that can help to make future exploration economically feasible and discovering hydrocarbons commercially viable, a senior executive with the company told Dow Jones Newswires Thursday.

The move is an about-turn, as India’s junior oil minister R.P.N. Singh had said in parliament in May that ONGC Videsh had decided to return Block 128 to Vietnam as exploration there wasn’t commercially viable.

A renewed push into the South China Sea will strengthen India’s ties with Vietnam but will rile China, which has opposed India’s presence in the region, claiming its own territorial rights over the potentially energy-rich sea.

“ONGC has just received a two-year renewal recently,” said Phan Tien Vien, chief of exploration division for Vietnam’s state-run Vietnam Oil & Gas Group, or PetroVietnam.

China claims sovereignty over much of the South China Sea, including areas close offshore some of its bordering states, putting it in conflict with Vietnam, the Philippines, Malaysia and Brunei.

Vietnam’s offer to India comes after China National Offshore Oil Corp., or Cnooc, in June offered nine blocks in the South China Sea for joint exploration with foreign companies, including parts of Block 128, which Vietnam says is inside its 200-nautical-mile exclusive economic zone granted under the United Nations’ Law of the Sea.

PetroVietnam has urged China to cancel bidding for the blocks, saying they are in Vietnamese waters, called on foreign firms not to participate and noted that ONGC, Gazprom OAO (GAZP.RS) and Exxon Mobil Corp. (XOM) have been operating in some of those areas for many years.

The Chinese government in 2011 warned ONGC that its exploration activities offshore were illegal and violated China’s sovereignty.

It is not clear what, if any, impact the decision to renew ONGC’s lease might have on a pact to cooperate with China’s largest oil producer in securing oil and gas assets globally.

In June, ONGC signed a memorandum with China National Petroleum Corp. to jointly explore for assets in other countries and expand cooperation in refining and processing of crude oil and natural gas, marketing and distribution of petroleum products, and construction and operation of oil and gas pipelines.

India is also stepping up its energy relationship with Vietnam. Last year, ONGC signed a three-year pact with PetroVietnam for long-term cooperation in the oil and gas industry.

– by Rakesh Sharma, Dow Jones Newswires, Thu Nguyen in Hanoi contributed to this article