In June 2006, the OVL had said as follows: “With this, OVL has bagged both blocks it had bid for among nine offered for global competitive bidding in Vietnam's 2004 Licensing Round. "With the award of Blocks 127 and 128 for offshore exploration in Vietnam, OVL is consolidating its existing presence with 45 percent participating interest in the gas-producing properties of Lan Do and Lan Tay offshore blocks," said OVL chairman Subir Raha. Blocks 127 and 128 are close to Nam Con Son project that sources gas from Lan Do and Lan Tay fields discovered by OVL (then Hydrocarbons India Ltd) in 1992 and 1993 respectively. OVL holds 45 percent participating interest in exploration activities in what is the biggest oil and gas project in Vietnam. The new exploration blocks awarded to OVL have in-place reserves of around 190 million tonnes of oil and oil-equivalent gas. With oil equity or participating interests in over a dozen countries including Russia and Sudan, OVL now has operatorship in four offshore exploration blocks. This includes the Farsi block in Iran, Najweet Najeem in Qatar and Blocks 127 and 128 in Vietnam. OVL is also the operator of an onshore exploration block in Libya.”
In September 2010,PetroVietnam chairman Dinh La Thang confirmed that his group had planned to submit a proposal to buy stakes in BP’s upstream offshore projects. Vietnam and BP are involved in four projects, the Lan Tay-Lan Do gas field in Block 06.1, Nam Con Son pipeline system, Phu My 3 power plant and BP Petco lubricant joint venture. BP planned to transfer stakes from the first three projects, but not the last one. A BP Vietnam representative said BP had informed the Vietnamese government of its intention to explore options for divestment of its upstream assets and was now awaiting approval. She said: “Our top priority is to continue safe and reliable operations now, during transition and thereafter.”
Dinh was quoted by the local press as saying that under the agreement signed among partners of the above projects, if one of the partners wanted to withdraw the investment capital or quit the project it would offer priority rights to buy stakes to the other partners in the project. “We have already made a plan to coordinate with the Indian partner [the third partner in those projects] to buy those stakes,” he said. Sections of the media quoted India’s then Petroleum Secretary S Sundareshan as saying that India’s Oil and Natural Gas Corporation (ONGC) and PetroVietnam would jointly bid for BP’s assets in Vietnam.
Thus, since May 1988, the OVL had been involved in oil and gas exploration in Vietnam. In the first block 06.1 awarded in May 1988, the OVL had a 45 per cent stake, the BP had a 35 per cent stake and the PV a 20 per cent stake. Even though the project has been working successfully, BP decided last year to disinvest its holdings reportedly due to poor security conditions and talks were on for the OVL and the PV to buy it.
In the remaining two blocks awarded to the OVL in 2006, the OVL has a 100 per cent stake. In Block 127 no oil or gas has been found and there were reports that the OVL was planning to disinvest it to the PV. Exploration work is still going on in Block 128 without any discovery of oil or gas so far. In the meanwhile, there have been reports that Essar, another Indian company, was also planning to enter the field of oil and gas exploration in co-operation with the PV.
China did not formally raise any objection to any of the agreements or projects till last year despite the fact that Indo-Vietnamese co-operation in the field of oil and gas is now 23 years old. Last year on two occasions, Chinese officials were reported to have privately informed their US counterparts that China considered the South China Sea also as its core interest in addition to Taiwan and Tibet. By core interest, China means an issue on which no compromise on the question of sovereignty is possible. Neither the US nor the ASEAN countries have accepted the new Chinese assertion of the South China Sea as of core interest to China with Chinese sovereignty paramount.
Since the beginning of this year, sections of the Chinese media and non-governmental experts have mounted a campaign to oppose the Vietnamese action in awarding these three blocks to an Indian company for exploration on the ground that these blocks belonged to China. The Chinese contention has been rejected by Vietnam.
The firm adherence of the OVL and the PV to the contracts of 1988 and 2006 in respect of these blocks has infuriated the Chinese. After the signing of the three-year framework agreement at New Delhi on October 12, the party-owned Global Times and the China Energy News, owned by the party-owned People’s Daily, have come out with comments of a jingoistic nature on the subject.
In an editorial published on October 14, the Global Times wrote: