BEIJING (Reuters) - India is playing with fire by agreeing to explore for oil with Vietnam in the disputed South China Sea, a major Chinese newspaper said on Sunday, advising the Indian company to reconsider and pull out.
India's state-run explorer Oil and Natural Gas Corp said on Wednesday its overseas investment arm had signed a three-year deal with PetroVietnam for developing long-term cooperation in the oil sector.
The news came as China and Vietnam signed an agreement seeking to contain a dispute over the South China Sea that has stoked tensions between the two Communist-ruled neighbours divided by a history of mistrust.
The China Energy News, published by Communist Party mouthpiece the People's Daily, said cooperation between India and Vietnam in these seas was a bad idea.
"India's energy strategy is slipping into an extremely dangerous whirlpool," it said in a front page commentary.
Both China and India have huge energy needs, which had led them to compete in some parts of the world and cooperate in others, it said.
"But oil companies must have a bottom line, which is to follow international law and respect the structure of international relations," the newspaper added.
"On the question of cooperation with Vietnam, the bottom line for Indian companies is that they must not enter into the disputed waters of the South China Sea," it said.
"Challenging the core interests of a large, rising country for unknown oil at the bottom of the sea will not only lead to a crushing defeat for the Indian oil company, but will most likely seriously harm India's whole energy security and interrupt its economic development.
"Indian oil company policy makers should consider the interests of their own country, and turn around at the soonest opportunity and leave the South China Sea," it said.
The pact between ONGC Videsh and Vietnam's oil and gas agency covers new investments and strengthening presence from drilling-to-dispensing in Vietnam, India, and other countries, ONGC said.
ONGC Videsh, along with TNK-BP and PetroVietnam, has a stake in a gas field in the Nam Con Son basin, off Vietnam's south coast. In 2006, Vietnam had awarded two exploration blocks -- 127 and 128 -- in Phu Kanh basin to ONGC Videsh.
Vietnam and China -- as well as the Philippines, Brunei, Malaysia and Taiwan -- stake conflicting claims over parts of the South China Sea, a potentially oil and gas rich body of water spanned by key shipping lanes.
Last month, China's top official newspaper warned that a joint energy project between India and Vietnam in the sea infringed China's territorial claims.
In May and June, Vietnam accused Chinese vessels of harassing Vietnamese ships within Vietnam's exclusive economic zone. China denied its ships had done anything wrong.
Businessmen and diplomats say China has pressured foreign firms in deals with Vietnam not to develop oil blocks in the sea.
China and Vietnam have agreed to strengthen military cooperation, increase contacts between high-ranking officers and establish a hotline for the two defence ministries in a bid to cool tensions, Xinhua news agency said on Saturday.
Reporting by Ben Blanchard and Sally Huang, Editing by Don Durfee