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Rosneft Vietnam Worried About South China Sea Drilling

Russia’s Rosneft earlier this week announced that it had started drilling a production well off the coast of Vietnam in the South China Sea. Today, two sources close to the Vietnamese unit of the Russian company told Reuters there were concerns there about China’s possible reaction to the drilling.

The well is located in the Lan Do gas field, which, according to Wood Mackenzie, falls within the nine-dash line outlined by Beijing as marking the territory that it has claim over in the South China Sea.

The Lan Do field holds an estimated 23 billion cubic meters of natural gas, and Rosneft also has plans to drill in another field that’s part of the same block, Phong Lan Dai, later this year. There is no sign of any concern in the company’s press release with the latest drilling update, but another oil company, Repsol, got burned not long ago when it tried to drill in the Vietnamese shelf.

In July last year, Vietnam called off a drilling expedition in the South China Sea after reported pressure from Beijing. The company that was drilling in the Block 136-03, a unit of Spain’s Repsol, was asked to stop drilling.

Then this March, PetroVietnam again asked Repsol to stop drilling at another block, 07/03, which is estimated to hold 45 million barrels of crude and 172 billion cu ft of natural gas. The Spanish company and its partners could part with US$200 million in lost investment in the project, the BBC reported at the time.

Related: Will $100 Oil Kill The U.S. Economy?

The dispute in the South China Sea involves territorial claims by China as well as Vietnam, the Philippines, Taiwan, Brunei, and Malaysia. China has territorial claims to about 90 percent of the South China Sea, which has put it at odds with its neighbors.

Apart from being a critical global trade route, the South China Sea is estimated to hold around 11 billion barrels of oil and 190 trillion cubic feet of natural gas in proved and probable reserves, with conventional hydrocarbons mostly residing in undisputed territory, according to the EIA.

By Irina Slav for Oilprice.com

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