Vietnam Says Cnooc’s South China Sea Bids Violate Territory

Cnooc Ltd. (883)’s moves to develop oil- and gas-rich northern areas of the South China Sea violates Vietnam’s sovereignty, the Vietnamese Foreign Ministry said.

China’s biggest offshore oil explorer opened bids to foreign companies last year for 19 blocks near the disputed Paracel Islands, according to its website. Vietnam singled out Block 65/24, which it said sits one nautical mile from one of the Paracels, in denouncing a range of Chinese actions that violate its territory.

Foreign Ministry spokesman Luong Thanh Nghi asked China to “cease all activities that violate Vietnam’s sovereignty,” according to a statement posted on the ministry’s website yesterday. China dismissed the allegations and called on Vietnam to respect its territorial integrity, Foreign Ministry spokesman Liu Weimin said at a briefing in Beijing today.

China’s neighbors have rejected its map of the South China Sea as a basis for joint oil and gas development, leading to clashes in one of the world’s busiest sea corridors. Exxon Mobil Corp. (XOM), Talisman Energy Inc. and Forum Energy Plc are among companies that have signed deals to explore disputed parts of the sea.

‘May Get Aggressive’

“Vietnam and China may get aggressive about these claims as they have been in the past,” said Tony Regan, a consultant with Singapore-based Tri-Zen International Ltd. who was previously an executive with Royal Dutch Shell Plc in the liquefied-natural-gas business. “I don’t think many significant players would want to take that risk unless it’s very clear that the two governments were talking and there’s a reasonable expectation of the dispute being resolved.”

Block 65/24 is the southernmost offshore area put out for bid by China last year in an offering that includes sections south of Hong Kong. Water levels in the block, covering an area about twice as big as the U.S. state of Delaware, are as deep as 2 kilometers (1.2 miles), according to CNOOC’s website.

“It is uncertain whether acreage like Block 65/24 and Block 55/03 are located beyond the Vietnam territorial claim line,” IHS Global Insight said in a report last year. “If so contractors risk becoming embroiled in political tension between the two countries, which are both emerging as attractive upstream investment locations.”

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 has opened tenders on offshore exploration blocks.

Oil reserves in the South China Sea may total as much as 213 billion barrels, according to Chinese studies cited in 2008 by the U.S. Energy Information Agency.

Vietnam also protested China’s live-fire drill this month near the Paracels and plans to expand tourism in the area, according to the ministry’s statement.

To contact Bloomberg News staff for this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

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

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