Repsol Says Drilling Suspended On Vietnam Oil Block Disputed By China

MADRID, Aug 2 (Reuters) - Spain's Repsol said it had suspended oil drilling in a block off Vietnam, where the prospecting in South China Sea waters claimed by China had infuriated Beijing and brought Chinese pressure on Vietnam to stop.

Tension has been growing between Vietnam and China over energy development in the waterway, where extensive Chinese claims are challenged by five Southeast Asian countries and disputed by the United States.

Repsol's chief financial officer, Miguel Martinez, said work had been suspended off Vietnam, according to the transcript of a conference call with analysts last week.

"We are working with the PetroVietnam and with the Vietnamese authorities and the only comment is that right now, operations have been suspended," he said.

"We will have to see what the output is, but as mentioned $27 million is what we have spent till now in this well."

A Repsol official confirmed the suspension on Wednesday, but declined to give further details.

Drilling began in mid-June in Vietnam's Block 136/3, which is licensed to Vietnam's state oil firm, Spain's Repsol and Mubadala Development Co of the United Arab Emirates.

The block lies inside the U-shaped "nine-dash line" that marks the vast area that China claims in the sea and overlaps what it says are its own oil concessions.

China had urged a halt to the exploration work and a diplomatic source with direct knowledge of the situation said that the decision to suspend drilling was taken after a Vietnamese delegation visited Beijing.

"Vietnam decided it didn't want to pick a fight with China over this," the source said.

Foreign Policy magazine said this week that China had threatened military action against Vietnam if it did not stop the drilling. It said that a decision to stop was made following acrimonious meetings of a divided politburo.

Vietnam has not confirmed the suspension of drilling but last week defended its right to explore in the area.

"Vietnam's petroleum-related activities take place in the sea entirely under the sovereignty and jurisdiction of Vietnam established in accordance with international law," Vietnamese Foreign Ministry spokeswoman Le Thi Thu Hang said.

"Vietnam proposes all concerned parties to respect the legitimate rights and interests of Vietnam."