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Vietnam Makes Bold Move For Oil In Disputed South China Sea

South China Sea

Vietnam has allowed a drillship in a contested part of the South China Sea, according to an industry consultant who spoke to the BBC.

The drillship, Deepsea Metro I, on contract to Talisman-Vietnam, a unit of Talisman Energy—which Spanish Repsol bought back in 2015—is drilling about 250 miles from the Vietnamese coast.

The move is a bold one, because the block where Deepsea Metro I is drilling—called Block 136-03 by Vietnam and Wan-an Bei 21 by China—has already been leased to a company by Beijing – Hong Kong-based Brightoil, which has close ties to the Chinese government. Over the last three years, Hanoi denied Talisman-Vietnam a license to drill in the block in a bid to avoid antagonizing China, but it seems things have since changed.

The report about the start of drilling comes soon after last week, a senior Chinese military official cut short a visit to Vietnam. Fan Changlong, vice-chairman of China’s Central Military Commission, was visiting Vietnam for a “defense border meeting,” as China’s Xinhua agency reported at the time, but left early because of “working arrangements.”

The true reason for the departure, the BBC suggests, may have been news about what Deepsea Metro I is doing in the disputed area.

Last year, China lost an international arbitration case brought to the court by its neighbors, including Vietnam. Asia’s second-largest economy is claiming most of the South China Sea, building artificial islands and increasing its military presence there.

Earlier this year, China warned the U.S. to stay out of the disputed waters, although this tension has recently subsided as both countries continue to focus on the North Korea problem.

The South China Sea may hold 28 billion barrels of oil, according to an estimate from the U.S. Geological Survey from the mid-90s. With technology improvements, this figure could have since increased substantially. Vietnam has welcomed several foreign companies into its oil and gas industry, including Rosneft, and Gazprom, as well as Exxon.

By Irina Slav for Oilprice.com

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