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Talisman-Vietnam, a subsidiary of Spanish energy firm Repsol, commenced gas-drilling operations in an area about 400 kilometers off Vietnam's coast earlier this month, but Hanoi has since ordered Repsol to leave the zone, the BBC said, citing an unnamed source.
Last week, Beijing warned Hanoi that it would attack Vietnamese bases in the Spratly Islands if drilling continued, the BBC continued.
The world's second-largest economy claims a massive section of the South China Sea that extends roughly 1,000 miles from its southern shores. The huge area is home to significant energy deposits and the world's busiest shipping routes. Vietnam, the Philippines, Malaysia, Brunei and Taiwan also assert sovereign rights over parts of the international waterway.
The site of Talisman-Vietnam's operations is known as Block 136-03 in Vietnam and Wan-an Bei 21 in China. In 2014, Hong Kong-based firm Brightoil bought the Chinese rights to the area, according to the BBC.
Hanoi's compliance with Chinese threats, if true, could spell bad news for Manila and Jakarta, which recently announced bold moves in the tension-ridden region.
This month, the Philippines suggested it could resume oil and gas drilling in the Reed Bank after a three-year suspension. Meanwhile, Indonesia has renamed the northern side of its exclusive economic zone in the South China sea and could soon use its navy to protect resource exploration.