In a move that could calm frayed diplomatic nerves between India and China, New Delhi has decided to exit the oil block no 128 in South China Sea, Indian media reported on Saturday.

Indian ministry of external affairs (MEA) has advised the petroleum ministry that ONGC Videsh Ltd (OVL), the global arm of the state-owned ONGC, can take a decision based on the "techno commercial reason" to stay in or exit block no 128.

The ONGC had written to the petroleum ministry, expressing its intent to relinquish the block, which in turn sought the view of foreign ministry on the issue.

The oil ministry in a letter to the MEA on April 10 had said, "OVL's decision to initiate relinquishment process is based purely on techno-commercial considerations."

OVL said the repeated attempts to drill wells in the block had failed due to the hard seabed in the area and staying with the block was an expensive proposition.

In a November 2011 meeting between the MEA and petroleum ministry, the difficulty of drilling the seabed and the expensive technology required for the same was discussed. But because these blocks are of strategic importance, the exploration by OVL led to a face-off between India and China last year — also reported first by HT.

Though New Delhi maintained that its exploration activities in South China Sea were purely commercial, Beijing has always seen it as an issue of sovereignty. With New Delhi giving its go ahead to OVL to relinquish the second Vietnamese oil block in South China Sea, India is virtually out of the controversial waters facing territorial dispute.

"We have received the reply from the ministry of external affairs, which has left it to ONGC to decide on techno-commercial reasons whether or not to exit the block 128 in the South China Sea," confirmed a senior petroleum ministry official.

The move to exit the two blocks, although based on techno-commercial reasons ---also indicates the possibility of a temporary truce with China. But because India and Vietnam had decided to strengthen energy cooperation last year, the tussle over the South China Sea can come back later.