Vietnam risks Chinese ire with latest oil project

Vietnam’s production from the South China Sea has been hit because of Chinese pressure.

Vietnam is risking a belligerent response from China with its latest gambit to increase dwindling oil and gas production in the South China Sea.

A new agreement to involve two Japanese firms in the latest project could be seen by Beijing as Hanoi’s most provocative move so far.

Vietnam has been seeking partnership with countries that have a track record of standing up to China, including Russia and the United States, following direct threats from China over disputed claims in the South China Sea.

The latest oil field, Sao Vang-Dai Nguyet, southeast of the southern port of Vung Tau, is close to a block that was abandoned earlier this because of direct Chinese threats.

The new project is closer to the Vietnamese coast but appears, at least in part, to lie within China’s ill-defined “nine-dash line” by which it claims historic rights to most of the South China Sea.

The state oil company, PetroVietnam, signed the agreement at the end of July with Idemitsu Kosan and Teikoku Oil to develop and sell oil from the site.

PetroVietnam has acknowledged that production has slowed down in recent years because of tensions in the South China Sea.

It says a government anti-corruption campaign that has targeted the oil giant and low prices have also contributed to falling production.

China is likely to see the involvement of Japanese firms as provocative given the high level of regional rivalry between the two countries and their own unresolved territorial disputes in the East China Sea.

Vietnam’s acute vulnerability has been exposed over the last year, with two major energy projects cancelled because of threats of military action.

The involvement of countries with substantial naval power of their own, and a determination not to be pushed around by Beijing, may help even the odds despite China’s ever growing ambitions in the disputed waters and beyond.