China has removed an oil rig near the disputed Paracel islands in the South China Sea after completing its exploration successfully.

Xinhua news agency reported that state-owned China National Petroleum Corp. (CNPC) completed its drilling and exploration in the region that earlier sparked a major spat between China and Vietnam.

The Zhongjiannan Project found signs of oil and gas in the area, and CNPC will assess the data collected and decide on the next step, the news agency said citing a company statement.

Preliminary analysis of the geological data acquired has shown that the area has the basic conditions and potential for oil exploration, but extraction testing cannot begin before a comprehensive assessment of the data, Xinhua quoted Wang Zhen, deputy director of CNPC Policy Research Office, as saying.

However, the company did not go for test operations due to safety reasons as July is the beginning of the typhoon season.

While the project may help improve understanding of the engineering and geological issues in the South China Sea, the development of "deep-sea drilling technology" will also benefit, said Wang.

The drilling rig will now be relocated to operations in the Hainan Islands, which is also under dispute with Vietnam.

CNPC started drilling two wells in the disputed islands in May, leading to clashes between ships from the two nations and major anti-China riots in Vietnam. The US described China's move as "provocative" and "aggressive".

Vietnam said the rig was in its exclusive economic zone and on its continental shelf, while China noted that it was operating completely within its waters around the Paracel islands.

Xinhua claims that CNPC has been exploring the area since 2004.

The countries were engaged in a short war in 1974 over the islands.

The row with Vietnam is part of Beijing's broader tensions with its neighbouring Southeast Asian nations over the South China Sea.

The rig's relocation is expected to reduce tensions between the two neighbours.