UPDATE 2-BP halts Vietnam exploration plan due China dispute

(Changes dateline, background in paragraphs 3-7)

LONDON/BEIJING, June 13 (Reuters) - BP Plc BP.L has halted plans to conduct exploration work off the southern Vietnamese coast due to a territorial dispute between Hanoi and China, the oil and gas company said on Wednesday.

“In the circumstances, we felt we had to suspend the planned seismic surveys of Block 5.2 in order to give the governments involved the opportunity to resolve the issue,” spokesman David Nicholas told Reuters.

The block is about 370 km (230 mi) offshore, between Vietnam and the Spratly Islands, a string of rocky outcrops in the South China Sea, suspected of containing large oil and gas deposits, which are claimed by Vietnam, China and Taiwan.

In April, after Vietnam said it planned to hold local elections on the islands, the Chinese foreign ministry said Vietnam was stirring up trouble by agreeing with BP and its partners to develop the area.

Vietnam replied that the $2 billion natural gas field and pipeline project was within the bounds of its sovereignty.

Nicholas added that BP’s gas production, fuel distribution and power operations in Vietnam were unaffected. He said BP had not expected to bring Block 5.2 or neighbouring Block 5.3 onstream for “some years.”

U.S. oil major ConocoPhillips COP.N and state-controlled Petrovietnam are partners in the exploration block.

Vietnam has traditionally been wary of its larger Asian neighbour and in 1979 the two countries fought a brief border war after Vietnam occupied Cambodia and overthrew the murderous Khmer Rouge regime backed by Beijing.

Beijing and Hanoi normalised relations in 1991.

In 1988, China and Vietnam fought a brief naval battle near one of the Spratly Island reefs in which more than 70 Vietnamese sailors died. But tensions have eased considerably in recent years as relations improve.

An industry source said French oilfield service group CGGVeritas GEPH.PA had been hired to conduct the 3D seismic survey works, using its vessel Orion.

additional reporting by Nguyen Nhat Lam in Hanoi and Maryelle Demongeot in Singapore