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China protests OVL deal in Vietnam

India’s signing of a memorandum of understanding (MoU) with Vietnam for two blocks in the South China Sea has caused a diplomatic tiff with China.

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NEW DELHI: India’s signing of a memorandum of understanding (MoU) with Vietnam for two blocks in the South China Sea has caused a diplomatic tiff with China.

The Asian neighbour has a territorial dispute with Vietnam in the area and has said that unless its permission is taken for the exploration, the activity is illegal.

Sources said Chinese embassy in New Delhi has issued a demarche — or a diplomatic protest — on the contracts recently.

The reason for demarche appears to be more than just the dispute with Vietnam since China itself is engaged with the Philippines and Vietnam for joint exploitation of natural resources in the area.

India and China have been close contestants for blocks all over the globe though they also have joint participation in oil exploration and production activities in Syria, Sudan and Russia.

Government-owned ONGC Videsh Ltd (OVL) had last year signed production sharing contracts with Vietnam Oil and Gas Corporation for blocks 127 and 128.

OVL is the operator of with 100% participating interest in the two blocks.

A spokesperson of the Chinese Embassy in New Delhi did not confirm nor deny the issue of demarche but said, “We do have a territory dispute with Vietnam.”

While stating that exploration activity in the Nansha Islands and nearby waters, the demarche has given examples of companies from the United States and Russia which have stopped exploration in the area

Vietnamese calls Nansha Islands as Truong Sa.

Under the contract with Vietnam, OVL, in the event of a commercial discovery will give PetroVietnam the option of obtaining up to a 20% participating interest in the blocks.

Blocks 127 and 128 cover approximately 9,246 sq.km and 7,058 sq.km area, respectively, and lie alongside the eastern coastline of Vietnam, northeast of Ho Chi Minh City.

The exploratory phase of both the contracts is seven years that will require minimum work programme during the first three years including the acquisition of new 3-D seismic data and the drilling of two exploratory wells in Block 127 and one exploratory well in Block 128.

The exploratory phase is followed by two optional two-year periods during which a well has to be drilled in order to retain the acreage. OVL was selected as the successful bidder in the global competitive bidding for nine offshore exploration blocks in the Vietnam 2004 Licensing Round.

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