India maintains stake in South China Sea dispute

25 August 2016, Week 33 Issue 607

The Vietnamese government has reportedly extended the exploration period for ONGC Videsh Ltd’s (OVL) wholly owned Block 128, which lies in contested waters of the South China Sea.

Quoting sources close to the matter, Indian news outlets said this week that OVL’s extension came after the exploration period had lapsed on June 15. OVL is the overseas upstream arm of state-run Oil and Natural Gas Corp (ONGC).

The extension is the block’s fourth, with PTI reporting that the licence is now valid until June 15, 2017. OVL originally received a two-year extension until June 2014, which was then followed by an additional 12 months. The company received a third, one-year extension in May 2015.

OVL has failed to make a single hydrocarbons discovery in the 7,058-square km block, which lies in the PhuKhanh Basin, despite investing nearly US$51 million. However, New Delhi is believed to be behind the company’s decision to stay in the block, as it gives India a stake in the ongoing territorial dispute between the two South China Sea neighbours.

Although the Permanent Court of Arbitration in The Hague rejected China’s historical claims to around 90% of the South China Sea last month, Beijing has refused to acknowledge the tribunal’s ruling. As such, Hanoi is believed to be eager to keep India in the contested acreage as a means of offsetting some of Beijing’s growing regional economic, political and military clout.

“The government of Vietnam wants India with them,” an unnamed source told Indian financial news outlet VCCircle. Hanoi’s original extension for Block 128 came after state-owned China National Offshore Oil Corp. (CNOOC) offered the same area in an international bid round in 2012.

VCCircle’s source added: “In the process, OVL will also be saving US$15 million that it would have to pay if it failed to drill the required number of wells.”

OVL has previously forecast that exiting the block without meeting its exploration commitments would cost the company US$15-20 million. OVL relinquished Block 127, which was awarded alongside 128 in 2006, after it completed its work programme.

Edited by

Andrew Kemp


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