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Vietnam, India to Expand Oil Exploration in Contested South China Sea



HANOI—Vietnam and India agreed Monday to expand cooperation in oil and gas exploration and production in contested waters of the South China Sea, despite previous objections from China.


The agreement between ONGC Videsh Ltd. and Vietnam Oil and Gas Group, or PetroVietnam, was among several signed between the two countries in Hanoi Monday as part of a four-day visit to Vietnam by Indian President Pranab Mukherjee.


"ONGC has been conducting oil and gas exploration and production in Vietnam for many years, and today's agreement will pave the way for us to extend our cooperation in other blocks offshore Vietnam," Do Van Hau, PetroVietnam's chief executive, told The Wall Street Journal.


ONGC already has a stake in a gas-production block on the southern Vietnam coast. It is also drilling in offshore exploration block 128 in the South China Sea. It relinquished adjacent block 127 in 2011 after it failed to find any oil or gas in the area.


In 2011, the Chinese government warned ONGC that its exploration activities off the Vietnam coast were illegal and violated China's sovereignty, but the company has continued its activities in Vietnam. China claims sovereignty over most of the South China Sea, where Block 127 and 128 are located.


Relations between Vietnam and India, both of whom are involved in territorial disputes with China, have moved steadily forward recently, with India seeing Vietnam as an important partner in Southeast Asia as it pushes its "Look East" policy. Trade between Vietnam and India rose 32% last year to $5.2 billion, according to Vietnamese government data. Vietnam's key exports to India are electronics, rubber, coffee and wooden products, while its imports from India include animal feed, pharmaceuticals and machinery.


Other deals relating to finance, agriculture, aviation and custom were also signed Monday during Mr. Mukherjee's visit.


India's Export-Import Bank signed a credit agreement with Vietnam's Finance Ministry, but details of the deal weren't officially announced. A government official familiar with the matter told The Wall Street Journal that the bank will extend a $100 million, 15-year loan to Vietnam for defense purposes, adding that the loan bears an annual interest rate of 2%.

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