OREANDA-NEWS. July 03, 2013. Vietnam and China have extended an agreement to jointly explore for oil and gas in the Gulf of Tonkin until 2016 and significantly expanded the area involved despite tensions between the two countries over large areas of the South China Sea they both claim.

The extension of the 2006 pact, reached during an official visit to China by President Truong Tan Sang this week, is another sign the two countries are ready to deepen economic cooperation despite heated rhetoric and occasional clashes over potentially large hydrocarbon reserves lying beneath the disputed waters.

Hanoi on Monday issued data showing that two-way trade between the two countries expanded sharply in the first five months of the year, although in China's favor, with its exports to Vietnam rising 30% on year to USD 9 billion while shipments to China were slightly lower, at USD4.9 billion. China has been Vietnam's largest trading partner since 2004.

The two started joint explorations in the Gulf of Tonkin, which lies to the north of hotly contested areas near the Paracel and Spratley islands, in 2006, and has been handled by state-owned Vietnam Oil & Gas Group, or PetroVietnam, and China National Offshore Oil Corp., or Cnooc. No commercially exploitable reserves have been found despite 3D seismic survey work and the drilling of one well.

"After the six years of joint operations, both sides have built good cooperation and collected important data about oil and gas potential in the area which are in need of expansion now," the Vietnamese government said.

The exploration area is being expanded to 4,076 square kilometers (1,574 square miles) from the 1,541 square kilometers (595 square miles) under the initial arrangement, and will run until 2016, the government said. The two sides will equally split operational responsibilities and costs, and if the joint operation finds commercial oil and gas reserves, they will move to joint production. Cnooc had no immediate comment, and the Chinese foreign ministry did not refer to the agreement in its daily press briefing.

A Hanoi-based analyst said although the move is a significant step forward in one of many areas of concern between the countries, which range from Vietnam's rising trade deficit with China to fishing rights, it isn't clear this will do much to help resolve the sovereignty issue in the South China Sea.

"So far Vietnam has moved very slowly in any cooperation on the sea issue with China. It's a huge political risk for the current government if it makes the public think that it is ceding the sovereignty for economic payoff, and Vietnamese politicians don't want this," said Vuong Quan Hoang from DHVP Research & Consultancy.

China and Vietnam are pushing hard to increase their access to natural gas and oil supplies, both domestic and foreign, to help meet their rising energy needs, but their dispute has meant that large areas of the western South China Sea so far have been explored only very lightly.

In June 2012, Vietnam protested and described as "illegal" and a serious violation of the 1982 U.N. Convention of the Law of the Sea a Cnooc offer to foreign companies of prospecting rights in nine offshore blocks in the South China Sea. These lay within the continental shelf of Vietnam and were entirely within Vietnam's 200-nautical-mile exclusive economic zone, PetroVietnam Chief Executive Do Van Hau said at the time.

Then in December 2012, the two traded protests when the Vietnamese foreign ministry said two Chinese vessels had deliberately cut the cables of a vessel doing seismic exploration work for Petrovietnam. China's foreign ministry said at the time that "it cannot accept Vietnam's statements" and said Vietnam should halt unilateral exploration in disputed waters.