eia.gov: Вьетнам, Country Analysis Brief: iv

iv_g

eia.gov: Вьетнам, Country Analysis Brief

May 27, 2012 09:00

Sector Organization

Vietnam's oil sector is dominated by the state-owned Vietnam Oil & Gas Corporation (PetroVietnam), essentially both the operator and regulator in the industry. PetroVietnam is under the authority of the Ministry of Industry and Trade and contributes about a quarter of the state budget. PetroVietnam typically seeks foreign investment to assist in some of the more capital-intensive hydrocarbon developments. All oil production in the country is carried out by PetroVietnam's upstream subsidiary, PetroVietnam Exploration and Production (PVEP), or through joint-ventures (JVs) or production sharing contracts (PSCs), in which the national oil company (NOC) has at least a 20 percent equity interest. Foreign companies typically negotiate directly with PVEP for upstream licenses of major fields in Vietnam, and all awards must receive approval from the Oil and Gas Department of the Prime Minister. PetroVietnam is also involved in Vietnam's downstream oil sector through various subsidiaries, such as Petechim and PetroVietnam Oil Processing and Distribution Company (PV Oil). The Vietnamese government began to privatize the NOC's non-oil related business units in 2006 as part of its goal to raise capital for upstream and downstream projects and increase operational efficiency, although the state plans to retain its hydrocarbon activities. PetroVietnam has expanded its activities overseas and holds upstream equity stakes in 15 countries. As of 2011, the NOC plans to spend over $2.3 billion to develop 25 petroleum projects in the former Soviet Union countries and Latin America.

Russian energy companies are expanding their presence in Vietnam as the two countries seek to form strategic partnerships and expand their overseas equity and production. The largest oil-producing company in Vietnam is Vietsovpetro (VSP), a long-standing joint venture between PetroVietnam and Zarubezhneft of Russia, which continues to operate the Bach Ho, Rong, and Rong South-East oilfields. The two firms agreed to extend the partnership for another 20 years starting in 2011. Other important Russian players in Vietnam, such as TNK-BP, Lukoil, and Gazprom, have forged deals for equity stakes in the Nam Con Son and Song Hong basins. TNK-BP acquired all of BP's original stakes in Vietnam including a 35-percent equity stake in Nam Con Son basin's Block 06-1, containing Lan Do, one of the largest gas field in Vietnam, and a 33-percent share of the Nam Con Son gas pipeline.

PetroVietnam also has formed partnerships with several other international oil companies (IOCs), NOCs, and smaller independent energy companies including the following: ExxonMobil, Chevron, BHP Billiton, Korea National Oil Corporation (KNOC), Total, India's ONGC, Malaysia's Petronas, Nippon Oil of Japan, Talisman, Thailand's PTTEP, Premier Oil, SOCO International, and Neon Energy. After a competitive bid in 2011, ConocoPhillips divested its assets in Blocks 15-1 and 15-2 of the Cuu Long basin and the Nam Con Son pipeline to Perenco, a French IOC, for US$1.29 billion.

Petrolimex is the primary company charged with importing and distributing petroleum products in Vietnam and accounts for about 60 percent of the country's total petroleum distribution market. Petrolimex also operates 300 miles of petroleum product pipelines, although much of the country's fuel supply is transported by road. Two other state-owned fuel oil distributors in Vietnam are PV Oil and Saigon Petro. There are plans to eventually sell equity stakes in Petrolimex and provide greater competition for the domestic market. So far, only 3 percent of the company's shares were sold off in a partial privatization to Vietnamese buyers.

Regulatory Environment

Vietnam's energy policy objectives, outlined in the National Strategy for Energy Development, established in 2007, seeks to ensure energy supply security for the country's rapidly growing domestic demand. Vietnam's recent reforms in the upstream sector are intended to pave the way for exploration of new offshore basins and more technically challenging fields by encouraging foreign investment. PetroVietnam directly negotiates with foreign firms on any new exploration area and any fields relinquished by other companies. In addition to direct negotiations with foreign firms for upstream contracts, Vietnam has increased the frequency of formal international licensing rounds since 2004. Several new regulations introduced in 2009-10 clarified the process for investment and outlined bidding round regulations. For instance, the Government of Vietnam (GoV) passed recent legislation providing greater contract flexibility by allowing domestic and foreign firms to extend exploration contracts past the project deadlines.

Currently, Vietnam maintains wholesale and retail oil prices lower than international oil market prices to sustain a growing economy, keep inflation from rising, and protect consumers, resulting in revenue losses for oil distributors. Vietnam's Ministry of Finance attempts to manage these losses through tools such as import tax and tariff reductions and the Fuel Price Stabilization Fund, which allows distributors to withdraw cash. In times of high crude oil prices, though, the fund's resources tend to diminish. Vietnam intends to gradually roll back fuel subsidies in the oil and natural gas sector and use market-based pricing in order to alleviate state budget strains in times of high international oil prices. Limited reform under Decree 84 allows fuel retailers to increase oil prices by 7 percent when international prices fluctuate by the same rate within a 30-day period, but the government typically tries to maintain lower prices for consumers and uses this measure as a last resort to reverse distributors' revenue losses.

When crude oil prices escalated in 2010, Vietnam reduced oil product import tariffs several times until early 2012, when the government slashed duties on gasoline, jet fuel, and diesel to zero. Also, the government resorted to boosting retail oil product prices by a total of 34 percent in 2011, and by an additional 12 percent in March 2012.

Exploration and Production
One of the most active areas for ongoing exploration and production activities in Vietnam is the offshore Cuu Long Basin. Vietnam's oil production has decreased over the last seven years primarily as a result of declining output at the Bach Ho (White Tiger) field, which accounts for about half of the country's crude oil production. After reaching peak output of 263,000 bbl/d in 2003, the field's production dropped to an average 92,000 bbl/d in early 2011. It is expected that Bach Ho's production decline rate will range from 20,000 bbl/d to 25,000 bbl/d through 2014. Vietsovpetro intends to boost oil production by using water injection to stem declines of aging fields and by investing $7 billion on exploration activities over the next five years.

Several new projects have come online in the last three years, offsetting declines at Bach Ho and other mature oil fields. Nonetheless, most of Vietnam's other developments are from small fields with peak production plateaus of three years. Two key developments in Cuu Long Basin's Block 15-1 are the Su Tu Den (Black Lion) and Su Tu Vang (Golden Lion) fields that produced a combined 100,000 bbl/d of oil in 2011. The field operator, Cuu Long Joint Operating Company (CLJOC), includes PetroVietnam (50 percent), Perenco - formerly ConocoPhillips' share (23.25 percent), KNOC (14.25 percent), SK Corp. (9 percent), and Geopetrol (3.5 percent). Su Tu Den and Su Tu Vang came online in 2003 and 2008, respectively. Su Tu Vang is currently Vietnam's second largest oilfield, producing around 70,000 bbl/d. Both fields have boosted production within Cuu Long basin, helping to offset declining Bach Ho production. CLJOC anticipates bringing on more production in Block 15-1 at bordering fields such as Su Tu Trang (White Lion) and Su Tu Nau (Brown Lion) between 2012 and 2015. According to consortium partner KNOC, recoverable reserves from the 4 new fields are 621 million barrels.

Besides developments in Block 15-1, several other JVs are undertaking significant exploration activity and bringing on several fields in the Cuu Long Basin. The Vietnam-Russia-Japan Petroleum Company launched the Doi Moi (South Dragon) field in 2010, producing 32,000 bbl/d and continues drilling surrounding developments. The Hoang Long JV operates the more sizeable Te Giac Trang (White Rhino) field, which came online in 2011 and has 55,000 bbl/d of peak capacity. Other smaller fields such as Hai Su Trang (White Sea lion) and Hai Su Den (Black Sea lion) are targeted to start production in 2013.

There are also extensive exploration and development activities ongoing in the Nam Con Son and Malay basins. The Nam Con Son basin, located south of the Cuu Long basin, is estimated to account for about 20 percent of Vietnam's hydrocarbon resources (4.5 billion barrels of oil equivalent). Vietnam launched production from the 25,000 bbl/d Chim Sao (Blackbird) field in 2011. Vietnam also receives about 27,000 bbl/d of oil from the shared PM-3 Commercial Arrangement Area between Vietnam and Malaysia.

Licensing Rounds
Vietnam held its first licensing round in 2004, although the offers did not receive significant attention from international oil companies. Vietnam launched the second bidding round in 2007 with improved terms for potential investors, hoping to garner interest from IOCs in order to draw on their superior technical expertise. This round included 7 blocks in technically difficult exploration areas in the Song Hong and Phu Khanh basins in northern and central Vietnam. A limited bidding round was held in 2008 for 7 blocks and subsequently signed 4 PSCs were signed. Between 2009 and 2010, another 19 PSCs were signed on an ad hoc basis.

The fourth international round, which began in the latter half of 2011, includes blocks from the gas-rich Nam Con Son, Phu Quoc, and Malay-Thochu basins. PetroVietnam intends to award exploration licenses for 9 blocks in the offshore basin by mid-2012. Although all of the fields are located close to the Spratly Islands, where China has contesting interests, China has not opposed exploration of the basins. Four of the blocks were retendered after previous operators relinquished rights. Only three of the blocks are in unexplored areas.
http://www.eia.gov/countries/country-data.cfm?fips=VM&trk=wn

Overlapping EEZ Claims and Oil Fields