China claims most of the potentially energy-rich South China Sea, through which $5 trillion in ship-borne trade passes every year.
The Philippines, Vietnam, Malaysia and Brunei also have overlapping claims.
China's deployment of the rig last year in what Vietnam called its exclusive economic zone and on its continental shelf, about 120 nautical miles off its coast, led to the worst breakdown in relations since a brief border war in 1979.
Vietnam's people remain embittered over a perceived history of Chinese bullying and territorial claims in the South China Sea, although China said at the time the rig was operating completely within its waters.
The rig now appears to be in an area where the exclusive economic zones (EEZ) of Vietnam and China overlap, but further away than last year, said Le Hong Hiep, a visiting fellow at Singapore's Institute of South East Asian Studies.
In an online statement posted on Thursday, China's Maritime Safety Administration said the 'Haiyang Shiyou 981' rig would carry out "ocean drilling operations" 75 nautical miles south of the resort city of Sanya on southern Hainan island.
Experts estimate the drilling site is about 104 miles (167 km) east of the Vietnam coast.
The $1-billion rig will remain there from June 25 until August 20, the statement said, telling ships to stay 2,000 m (6,562 ft) away for safety reasons.
Vietnam's maritime authorities were monitoring the rig's placement, the website of the country's state-controlled Tuoi Tre newspaper on Friday quoted unidentified sources as saying.
The rig movement comes weeks before Vietnam's top leader, Nguyen Phu Trong, is expected to visit the United States, in the first such trip by a general secretary of the nation's Communist Party.
His mission is expected to further boost warming strategic ties between Washington and Hanoi - a relationship eyed warily in Beijing.
It also comes amid rising concerns at China's rapid creation of artificial islands on South China Sea reefs - construction criticized by the U.S. and protested by Vietnam.
However, Le Hong Hiep, the Singapore-based analyst, said he felt Hanoi would not protest as strongly as it did last year if China said the rig was placed within an EEZ claimed from Hainan Island rather than one from the hotly disputed Paracel Islands, as it did last year.
Vietnam and China agreed on an equal split of the maritime boundary of the Gulf of Tonkin in 2000 but have yet to agree on demarcating waters further south, near the rig's current site.
Earlier this year, the rig was drilling in the Andaman Sea off the coast of Myanmar, tackling the deepest exploration well it has so far undertaken, its owner, state energy group China National Offshore Oil Corporation (CNOOC), said in an earlier statement.
CNOOC could not immediately be reached for comment on Friday.
Yesterday, Vietnamese newspapers began reporting, citing the Chinese Maritime Safety Administration (MSA), that China’s Haiyang Shiyou 981 (HD-981) oil rig was being moved to waters where China and Vietnam’s Exclusive Economic Zones (EEZs) overlap. According to the news reports, the platform is now located 17°03'75’' North latitude and 109°59’05’’ East longitude.
In the statement, MSA warned that all ships must stay 2,000 meters away from the rig. The HD-981 will explore for oil and gas in the region between now and August 20, according to the MSA statement.
Last year, the HD-981 was sent deep inside Vietnam’s EEZ, which plunged Chinese-Vietnamese relations to their lowest level in years. Vietnamese ships tried to challenge the oil rig’s deployment, and China sent upwards of 100 vessels to protect the HD-981. Ultimately, after a bitter falling out, Beijing removed the oil rig ahead of schedule.
The oil rig’s current location is not as close to Vietnam as it was last year, which might temper Vietnam’s response to the new provocation. In addition, China is likely to claim the oil rig is within Hainan Island’s EEZ, rather than one of the Paracel Islands, which both Hanoi and Beijing claim.
Still, the new deployment comes amid increasing concerns over Beijing’s aggression in the South China Sea. In recent months, China has undertaken a massive reclamation project on reefs and rocks in the South China Sea, which it is transforming into civilian and military bases. These new islands will enhance China’s ability to project power in the region. China has also been increasing the frequency and sophistication of its military exercises in the region.
Before this latest development, there had been signs that China was engaging in a charm offensive in an attempt to reduce tensions ahead of important bilateral and multilateral meetings, including the U.S.-China Strategic and Economic Dialogue, which took place in Washington earlier this week. For example, China’s Foreign Ministry recently announced that its land reclamations were being wrapped up, although this was partly because the most important ones had already been completed.
As Reuters notes, the oil rig’s deployment comes just weeks before the chief of Vietnam’s Communist Party, Nguyen Phu Trong, is set to visit the United States for the first time. Washington and Hanoi have grown closer in recent years as China’s growing power and aggression in the South China Sea have given the two countries’ common cause.
This new development will only further strengthen Vietnam’s desire to strengthen ties with the United States as a way to balance its more powerful neighbor.