India will remain a contender in the struggle for the South China Sea for two more years. State-owned ONGC Videsh Ltd (OVL) has decided to continue oil and gas exploration in the disputed offshore Block 128 despite Beijing's warnings that this infringes on Chinese territorial claims.

OVL's decision is a volte face by the company, which had indicated just some months ago that it intended to exit Block 128 because of its rocky seabed and difficult exploration conditions.

OVL on Tuesday confirmed to HT that it has accepted an offer from Vietnam's national oil company, PetroVietnam, to stay on for another two years.

"We have accepted the offer by PetroVietnam to extend our contract in Block 128 by a few more years," a senior OVL official said.

Last month, China invited international bids to explore this offshore block.

OVL officials said they had agreed to the extension "well before" China called for bids. Their decision came after PetroVietnam offered more "favourable terms and conditions".

"China can go ahead with its offering but who will bid for a block that is under dispute?" an OVL official asked.

"We have been told by the petroleum and foreign ministries to take a decision based on techno-economic considerations. The fresh techno-commercial data and easier frameworks proposed by PetroVietnam made OVL reverse its earlier decision to exit from the block earlier this year."

The OVL decision, however, would parallel India's official position that China had no "legal basis" for its protests against OVL's exploration of that block.

New Delhi has indicated it does not believe China's territorial claims stand up to international law.

Government officials admit OVL's decision could aggravate relations between New Delhi and Beijing.

It could also insert India into a widening political struggle over control of the South China Sea, pitting China against several Southeast Asian nations.