State-owned ONGC is caught in the middle of a logjam preventing it from exiting a dry block in the disputed waters of the South China Sea.
The global arm of ONGC - ONGC Videsh Ltd (OVL) that has been carrying out exploration work in the deep-water offshore in the South China Sea - has written to the petroleum ministry, expressing its intent to relinquish the block.
Reason: repeated attempts to drill wells in this block failed due to the hard seabed in the area.But as these blocks are of strategic importance and as exploration by OVL led to a face-off between India and China last year - reported first by HT - New Delhi does not want ONGC to stage a "sudden exit" from the block at this stage.
"If ONGC moves out of Block 128, India may be seen as bowing to the pressures from Beijing that has been terming the exploration activities by India as 'illegal'," said a senior government official.
OVL has already moved out of another exploration block last year citing similar reasons.
The ministry said in a letter to the ministry of external affairs on April 10: "OVL's decision to initiate relinquishment process is based purely on techno-commercial considerations."
An ONGC official said, "This is not the end of India's presence in the South China Sea. OVL has an agreement with Vietnam's national oil company PetroVietnam to jointly explore for more oil and gas in the area."
OVL also has a 45% stake in an offshore block situated on the southern Vietnamese coast - which is not in the disputed waters - with BP and PetroVietnam as partners.
Some fields in this block have been producing gas since 2003 and OVL is developing more wells in this block to step up gas production.
New Delhi has been maintaining that the blocks that have been claimed by China in the South China Sea belonged to Vietnam and the Chinese claim has no "legal basis".
What's more, India has taken the stance that it supports the freedom of navigation in the South China Sea under the 2002 declaration of conduct in the South China Sea.
If the government agrees on the exit strategy, there is the possibility of a temporary truce with China. But since India and Vietnam has decided to strengthen energy cooperation last year, the tussle over the South China Sea will not be over soon.
"Let it be very clear. We have said it in the past and we are saying it again. Our cooperation with Vietnam or with any other country is always based on international laws, norms and conventions," a government official explained.