It would be fairly simple to conclude that India gave up the oil exploration in block 128 of south China sea under pressure from China. This oil exploration block falls in Vietnam' exclusive economic zone and along with block 127, it was assigned to the global arm of the Indian, state-owned Oil and Natural Gas Corp; ONGC Videsh Ltd; by Vietnam. India began production tests in September 2009. However it first decided in 2011 to get out of block 127 as no oil showed up in the exploratory well. Now, after another year of exploration, ONGC has informed the oil ministry of India of it's intent to relinquish block 128, also on basis of techno-commercial (not enough oil there) considerations. Oil ministry has approved the action and as per terms of contract with Vietnam, India has paid a $15 million exit fee to Petro Vietnam for getting out of the block. It is now reported that a meeting of officials from ONGC Videsh and their counterparts from Petro Vietnam is likely to take place in Hanoi in May 2012 to discuss further steps that must be taken up to continue the energy cooperation agreement between these countries.
Chinese, already jittery about India's presence in their backyard are naturally happy. Though New Delhi maintained that its exploration activities in the South China Sea were purely commercial, Beijing has claimed that it was an issue of sovereignty. Sun Weidong, deputy director of the department of Asian affairs with Chinese Foreign Ministry Asian Affairs, said the region is a disputed territory and it does not benefit India to carry out explorations in the area.
India and Vietnam signed the first gas exploration contract way back in 1988 for two blocks (Lan Tay and Lan Do) in the Nam Con Son Basin, close to the Natuna Sea near Indonesian territorial waters. China never really objected to this as late as mid 2000. Block 127 and 128 are located up north in Phu Kanh Basin, having roughly equal distance from the Vietnam coast and Hainan Island of China, where it has a large submarine base. Vietnam has always claimed that Phu Kanh Basin is in a continental shelf and falls in it's exclusive economic zone.
There are number of international disputes about sovereignty in South China sea, with Vietnam, Philippines and Japan claiming their sovereignty over parts of it and China counter claiming that entire south China sea as her own. India is no way involved in these disputes with her main interest, the lanes of shipping, are always kept open as half of India's external trade passes through south china sea. Some in India, look at the oil exploration activity in south china sea as a tit-for-tat for China's construction activities in Pakistan occupied Kashmir. This logic does not sound very rational to me as stakes for India in south China sea, are much larger and important.
After adopting 'Look-East Policy', India has taken positive and calculated steps to develop close military relationship with Vietnam, like supply of military hardware and increasing number of slots in military training courses for Vietnamese army officers. There are number of Vietnamese requests like transfer of Brahmos missiles, submarine training, conversion training for its pilots to fly Sukhoi-30 fighter jets, modernization of a strategic port and sale of medium-sized warships. No one in public domain knows yet, to what extent these demands have been met by India. In any case, it is obvious that this relationship with Vietnam is a very strong counter strategy against Chinese arming of Pakistan.
It has been reported that four Indian Navy warships, INS Rana, Shakti, Shivalik and Kurmak are currently sailing in the South China Sea. Out of this, INS Rana and Shakti , are paying goodwill visits to Philippines in Subic Bay. Two others, Shivalik and Kurmak, are at present on call at Haifong in Vietnam. Interestingly all four ships have a common destination; Shanghai, where they will pay a goodwill visit. Presence of four warships simultaneously in south China sea is perhaps the strongest indication that India means business and is keen to maintain a strong role for itself in the region.
If there is no oil in block 128, in Phu Kanh Basin in South China sea, India's decision to withdraw might turn out to be a good decision for diplomatic and commercial reasons. South China sea is fast becoming a conundrum of messy international disputes with multiple players. By getting involved in this dispute, may turn out as an additional impediment in developing critical maritime relationship with China. Off course, if there is oil in block 128, then getting out would turn out to be a costly error as relationship with India's trusted friend in the region, Vietnam, certainly would get strained.
India might have taken a good decision, but it must be followed up with strong naval presence in south China sea along with further bonding of strong relationship with Vietnam.
26 May 2012
(The graphic about Hydrocarbon quest is curtsey The Hindu)