ONGC ends 5% up as company gets extension to explore Vietnam block in South China Sea

NEW DELHI: Shares of Oil and Natural Gas Corporation (ONGC) surged over 6 per cent after the state-owned company received a one-year extension to explore in a Vietnam oil block in the contested waters of the South China Sea.

The scrip closed the session at Rs 243.55, up 5.55 per cent.

The stock hit an intraday high of Rs 245.10, on the BSE.

In a regulatory filing, ONGC said its overseas investment arm, ONGC Videsh Ltd (OVL) had applied for extension of block to PetroVietnam, Vietnam's national oil company, on May 28, 2015.

"In response of ONGC Videsh request, PetroVietnam has granted extension of the block up to June 15, 2016," the company said.

OVL had signed Production Sharing Contract (PSC) for the 7,058 square kilometer Block 128 in offshore PhuKhanh Basin, Vietnam on May 24, 2006. Ministry of Planning & Investment (MPI), Vietnam issued investment licence for the Block on June 16, 2006, being effective date of the PSC, ONGC said.

The company has not found any hydrocarbon in the block but is continuing to stay invested.

ONGC termed the extension as "routine" saying such an exercise is carried out in all the exploration blocks where extensions are required for further studies.

OVL first took a two-year extension of the exploration period till June 2014 and then another one year. That extended licence expired on June 15, 2015. The company has so far invested USD 50.88 million in the block.

The block lies in the part of South China Sea over which China claims sovereignty. In 2011, Beijing had warned OVL that its exploration activities off the Vietnam coast were illegal and violated China's sovereignty, but the company continued exploring for oil and gas.

OVL forayed into Vietnam as early as 1988, when it bagged the exploration licence for Block 06.1.

The company got two exploration blocks - Block 127 and Block 128, in 2006. However, Block 127 was relinquished due to poor prospectivity but the other Block 128 was retained.

The first extension followed China putting the area under Block 128 for global bidding.

OVL holds 100 per cent interest in Block 128.

China claims sovereignty over most of the South China Sea where Block 127 and 128 are located and had warned the Indian arm from drilling in the region.

OVL continues to own 45 per cent stake in Vietnam's offshore block 6.1 and its share of production was 2.023 billion cubic metres of gas and 0.036 million tonnes of condensate.

(With inputs from PTI)