Allocation of oil blocks in Phu Khanh basin of South China Sea could get a quiet burial

The visit of Vietnam’s top leader and General Secretary of Vietnam Communist Party Nguyen Phu Trong beginning on Tuesday is expected to lend clarity to India’s quest for greater intensity in bilateral energy, defence and economic ties, said official sources in the Ministry of External Affairs (MEA).

Economics will be the driving force of bilateral ties in future with India looking for opportunities in setting up refineries and the Tatas looking forward to setting up a 1,320-mw thermal power project after the failure of its $5 billion plan to set up a steel plant.

The India-Vietnamese project that has garnered the most attention — allocation of two oil blocks in Phu Khanh basin of South China Sea that is contested by China — could get a quiet burial after Beijing offered to Hanoi a joint approach on economic issues and has taken to discussing the sovereignty issue with ASEAN as well as bilaterally with Vietnam.

Official sources gave hints about India planning to withdraw from prospecting for block 128 on commercial considerations just like it returned block 127 about four years back.

ONGC Videsh Limited (OVL) has conveyed to the MEA about the need to relinquish this block which it has had to hold on due to foreign policy considerations despite clear indications about low prospects. OVL has time till next year to hand back the block and the feeling here is that with techno-economic surveys proving to be disappointing, it would be prudent to walk away and look at other opportunities opening up in the hydrocarbons sector.

Defence and security is another area where both sides are keen to add more content. India and Vietnam already have enabling agreements in place and are looking to build on the strong defence training programme, frequent exchange of visits and training of Vietnamese submariners.

India has already offered a $100 million credit line for the purchase of offshore patrol vessels but official sources remained non-committal of prospects of Indian defence exports, especially the Brahmos missile, although China’s close ally Russia has been enhancing its defence ties with most major countries in the rim including Vietnam, Indonesia and Malaysia.

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