HANOI/HONG KONG: Some oil blocks off Vietnam’s sprawling coastline fall within an area of the South China Sea demarcated by China’s ‘nine-dash line’, the basis for Beijing’s controversial claims to most of the resource-rich waterway.
Last week, sources said Rosneft Vietnam BV, a unit of Russian state oil firm Rosneft, was concerned its recent drilling in one such block could upset Beijing.
That prompted Vietnam’s foreign ministry to assert the blocks are “entirely under Vietnamese sovereignty and jurisdiction”, and a warning from Beijing to respect its sovereign rights.
In March, Vietnam halted an oil drilling project in the nearby ‘Red Emperor’ block following pressure from China.
The Red Emperor incident was a “blow to Vietnam’s upstream sector and the government’s bid to develop the offshore oil and gas resources that it is legally entitled to under the UN Convention on the Law of the Sea,” according to analysis by risk analysts Verisk Maplecroft.
The area is important for Vietnam’s economic development.
State-run Vietnam Oil & Gas Group, or PetroVietnam, made up 20 per cent of Vietnam’s GDP and 30 per cent of Hanoi’s total budget revenue from 1986-2009.
Vietnam has between 3.3 billion and 4.4 billion tonnes of crude oil and gas reserves in the waters, according to PetroVietnam, which currently produces 22-33 million tonnes of oil equivalent a year from the blocks.
According to consultancy firm Wood Mackenzie, if China’s nine dashes were connected as one continuous line, it would bisect or incorporate 67 of Vietnam’s oil blocks.
Four of those blocks are currently producing, with others at varying stages of exploration or development, according to Wood Mackenzie.
China’s claims in the South China Sea overlap the exclusive economic zones of Vietnam, the Philippines, Malaysia and Brunei.
Despite fierce diplomatic objections by Beijing, the Philippines sought a ruling in 2016 against China in an arbitration case brought under the UN’s Convention of the Law of Sea.
The five international judges handed Manila a sweeping victory which dismissed China’s claims and removed any legal basis for Beijing to create a network of linked territorial and economic seas under its control, legal experts said.
Chinese officials, who refused to participate in the case, dismissed it as a farce and have continued to insist on jurisdiction over most of the waterway – although they have not yet defined the line as a continuous one.
China and other claimants have previously discussed joint development of energy projects in disputed waters, but have been scuppered by issues over sovereignty.
Last month, the Philippines said it was looking to seal a pact with China within a few months to jointly explore for oil and gas in waters claimed by both countries.
But while China has been ambiguous about precisely what it claims, the waters around Vietnam’s southeastern oil fields have long been a flash-point. — Reuters