In rare comment, PetroVietnam says South China Sea tension to hurt offshore operations

HANOI (Reuters) - Tension in the South China Sea will hurt PetroVietnam’s offshore exploration and exploitation activities this year, the state-run oil and gas group said on Tuesday, weeks after the Southeast Asian nation suspended a project under pressure from China.

FILE PHOTO: Flag of PetroVietnam (R) flutters next to Vietnamese national flag (C) and Communist Party flag in front of the headquarters of PetroVietnam in Hanoi January 11, 2016. REUTERS/Kham

Vietnam and China have been embroiled in maritime disputes in parts of the busy waterway, where China claims 90 percent of the potentially energy-rich maritime territory, which Vietnam calls the East Sea.

“The East Sea is forecast to continue to have uncertainty this year ... affecting the company’s efforts to attract foreign investors to invest in its open offshore fields”, PetroVietnam said on its website.

PetroVietnam has rarely openly admitted that the tension has had an adverse impact on its offshore exploration and production fields, especially those located near the U-shaped “nine-dash line” that marks the vast area claimed by China.

During a trip to Hanoi on Sunday, Chinese Foreign Minister Wang Yi said both nations should settle their disputes in the South China Sea through talks and move to jointly use its waters.

The two countries had agreed such a move was “extremely important for the healthy and sustainable development of bilateral relations,” Wang said.

In its statement, PetroVietnam said the dispute with China would add to its struggle to maintain crude oil output amid already declining production from Vietnam’s key fields.

Last month, it ordered Spanish energy firm Repsol to suspend its “Red Emperor” project off Vietnam’s southeastern coast following pressure from China, sources told Reuters.

The $1-billion “Red Emperor” field is of moderate size by international standards but was seen as a key asset to help slow the decline of Vietnam’s stalling oil and gas production.

But the block lies near China’s “nine-dash line” and overlaps what it says are its own oil concessions.

Vietnam’s crude oil output this year is expected to fall 14.7 percent from last year to 11.31 million metric tonnes, or 227,130 barrels per day, the government has said.

Reporting by Khanh Vu; Editing by James Pearson and Clarence Fernandez