India's ONGC Videsh Ltd. (OVL), the overseas upstream subsidiary of the country's state-owned Oil and Natural Gas Corp. Ltd. (ONGC), planned to continue with exploration work in Block 128 in the South China Sea, according to a report Monday by local financial media VCCircle.
The decision by OVL comes after the authorities in Vietnam granted a further extension of the exploration block that had expired in mid June.
"Extension to OVL for the block has been granted," a source close to the matter told VCCircle.
The extension of Block 128 -- located in the South China Sea where Vietnam, the Philippines, Malaysia and Brunei are locked in a territorial dispute with China -- comes after Beijing's claim over most of the regional waters was rejected by the Permanent Court of Arbitration (PCA) in July. The decision came after the Philippines took its territorial spat with China to the international court.
OVL has already received two extensions for Block 128, with the first 2 year extension granted till June 2014, followed by a 1 year extensions till June.
"The government of Vietnam wants India with them," a second source told VCCircle, adding that "in the process, OVL will also be saving $15 million that it would have to pay if it failed to drill the required number of wells."
It is understood that Vietnam did not want OVL to relinquish the block as part of its strategy to counter-balance China's territorial claims in the South China Sea, including the area covering Block 128 as well as that for Block 127, which OVL had earlier given up.
"The block is not commercially viable for OVL. However, instead of having a profit motive, the state-run unit has strategic motives behind this. The South China Sea block has always been a tough bet for OVL," Jabin T. Jacob, assistant director and fellow at New Delhi-based Institute of Chinese Studies, said, as quoted in the report.
According to ONGC Group’s Perspective Plan 2030, OVL’s oil and gas production is expected to increase from the current level of 7.26 million tons of oil equivalent (MMtoe) to 20 MMtoe by 2017-18 and 60 MMtoe by 2029-30.
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