Bloomberg News

Vietnam Calls on Cnooc Parent to Scrap Oil Exploration Bids

June 27, 2012

Vietnam called on China National Offshore Oil Corp., the state-owned parent of Cnooc Ltd. (883), to cancel an invitation for foreign oil and gas companies to explore nine blocks in disputed waters of the South China Sea.

Seeking bids for the exploration areas is an illegal act that “seriously violated” Vietnam’s sovereign rights, Ministry of Foreign Affairs spokesman Luong Thanh Nghi said in comments posted on the ministry’s website yesterday. The company should “immediately cancel” the invitation, he said.

China’s tender may lead to more tension in the waters after its surveillance ships last year moved to thwart efforts by Vietnam and the Philippines to explore for oil and gas in one of the world’s busiest sea corridors. Exxon Mobil Corp. (XOM:US), Talisman Energy Inc. (TLM) and Forum Energy Plc (FEP) are among companies that have signed deals to explore the area.

The location of the blocks indicates that China claims the maritime spaces within its so-called nine-dash map of the sea, a development that will further alarm claimant states, according to Clive Schofield, director of research at the Australian National Centre for Ocean Resources & Security.

“There are highly likely to be future clashes should there be actions taken by any of the countries concerned to try and explore within those blocks,” he said. “The designation of blocks is in a sense a proxy way of states trying to reinforce their jurisdictional rights.”

Drilling Rig

Cnooc deployed China’s first deep-water drilling rig last month near disputed islands to assert Beijing’s territorial claims. The company said the blocks, covering an area of 160,124 square kilometers, are available for exploration and development cooperation with foreign companies this year, according to a June 23 statement on its website.

The area “lies entirely within Vietnam’s 200-nautical mile exclusive economic zone and continental shelf,” Nghi said. “This is absolutely not a disputed area.”

China’s oil exploration in the South China Sea is “normal corporate activity” and complies with international law, Foreign Ministry spokesman Hong Lei told a regular briefing in Beijing yesterday.

The invitation for bids came as Vietnam’s parliament passed a law reasserting its sovereignty over the area. China summoned Vietnam’s ambassador June 21 to protest the move, with Vice Foreign Minister Zhang Zhijun saying Vietnam’s statement wasn’t “conducive to peace and stability.”

Defense Ties

The disputed waters are estimated to have as much as 30 billion tons of oil and 16 trillion cubic meters of gas, which would account for about one-third of China’s oil and gas resources, according to the Xinhua News Agency. China had 2 billion tons of proven oil reserves and 99 trillion cubic feet of natural gas reserves in 2010, according to BP Plc. (BP/)

The Philippines and Vietnam have increased defense ties with the U.S. while rejecting China’s map of the South China Sea as a basis for joint development. China yesterday repeated its call to shelve disputes in favor of working together to exploit the resources.

The Philippines has set a July 31 deadline to develop two areas in the South China Sea claimed by China. Vietnam objected in March to Cnooc’s plans to invite bids for Block 65/24, which sits 1 nautical mile from the disputed Paracel Islands.

China ousted Vietnam from the 30 islets and reefs that comprise the Paracels in a 1974 battle in which 71 soldiers were killed. The countries also dispute the Spratly Islands further to the south, an area near where fellow claimant the Philippines is seeking to develop offshore exploration blocks.

To contact the reporter on this story: Nick Heath in Hanoi at nheath2@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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