India drops its claim to a swathe of the Bay of Bengal; Bangladesh says move will unlock drilling opportunities

If good fences make good neighbours, that may explain why much of Asia’s recent territorial tension has centered on the ocean. India took a step toward tighter ties with Bangladesh this month in surrendering its four-decade claim to a swathe of the Bay of Bengal about the size of Lake Ontario, opting to heed a United Nations backed ruling.

Bangladesh praised its neighbour’s move, with the head of state-run oil monopoly Petrobangla saying the newfound clarity will unlock drilling opportunities.

The decision provides a contrast with China, which declines to acknowledge any UN jurisdiction in its dispute with the Philippines over maritime claims. The difference in approach shows why tensions are rising in the South China Sea as companies ramp up oil and gas investment in the Bay of Bengal.

The Permanent Court of Arbitration on July 7 awarded about 19,500 square km (7,500 square miles) to Bangladesh, some 76 percent of the area under dispute with India.

The move followed a decision last year that clarified Bangladesh’s border with Myanmar. The cooperation has opened up access to energy exploration for India and Bangladesh, which now account for less than 1 per cent of the world’s proven gas reserves, according to estimates by BP Plc.

By the year’s end, Bangladesh plans to auction 18 oil and gas blocks in the Bay of Bengal, including 10 previously claimed by India, according to Hossain Mansur, chairman of state-run Petrobangla.

"It’s now a big opportunity for us to explore sea blocks for oil and gas without disruptions," Mansur said by phone from Dhaka on July 23.