Vietnam’s oil and gas industry is currently the country's biggest foreign currency earner and a major procurer of imported technology, services and equipment. In 2009, Vietnam produced 24.3 million tons of oil equivalent, and earned $14.24 billion in revenue, accounting for about 16 percent of GDP; and exported 16.3 million tons of crude oil, worth $7.82 billion, accounting for 14 percent of total national exports. Oil and gas is one of the top priority sectors for development by the Government of Vietnam since it is viewed as central to national economic growth and energy security. The oil and gas industry in Vietnam is under the principal jurisdiction and management of the Ministry of Industry and Trade (MOIT). PetroVietnam, the national oil and gas group reports directly to the Prime Minister and holds a monopoly in the upstream, mid-stream and virtually all key downstream areas of the industry. In 2009, PetroVietnam maintained the No. 1 rank in Vietnam’s Top 500 biggest companies. In 2009 alone, the taxes paid by PetroVietnam accounted for 24 percent of Vietnam’s state budget.
Upstream and Midstream
Vietnam is currently ranked fourth in Southeast Asia after Indonesia, Malaysia, and Brunei for oil and gas production and oil reserves. Vietnam’s continental shelf is about one million km2, comprising major tertiary basins and groups of basins: Song Hong, Phu Khanh, Cuu Long, Nam Con Son, Malay-Tho Chu, Tu Chinh-Vung May, Hoang Sa (the Paracel Islands) and Truong Sa Group (the Spratly Islands). Of these, the Cuu Long and Nam Con Son basins have shown the most hydrocarbon potential.
To date, about 100 hydrocarbon-bearing prospects have been found in almost 50 fields, with estimated reserves of approximately 600 million tons of crude oil and 644 billion cubic meters (bcum) of natural gas (23 trillion cubic feet -Tcf). Among the 50 structures with oil and gas discoveries, there are 20 commercial fields.
From 1988 to 2008, PetroVietnam signed 60 oil and gas exploration and production contracts with foreign companies in the form of Product Share Contracts (PSC), Business Cooperation Contracts (BCC), Joint Ventures (JV) and Joint Operation Companies (JOC). Of these, 35 contracts are currently in effect. In 2008, PetroVietnam entered into agreements for 16 projects in foreign countries, consisting of 6 projects in Southeast Asia, 6 projects in the Middle East and Africa, and 4 projects in South America. In 2009, PetroVietnam signed 13 contracts with local partners, 2 contracts with foreign ones, and 7 cooperation agreements with the national oil and gas companies of Nicaragua, Bolivia, Argentina, Kazakhstan, Mozambique, Angola and Sudan.
In 2009, the country produced 24.3 million tons of oil equivalent, comprising 16.3 million tons of crude oil and condensate and 8 billion cubic meters of gas, an increase of 8 percent compared to the company’s 2008 production. In the medium term, oil production is expected to decline gradually due to the deteriorating performance of the White Tiger field while other new discoveries will not offset this loss in production. Gas production, however, will rise significantly since several gas fields will be put in production in the near future. At present, about 85 percent of the natural gas produced in Vietnam is used for power generation, 10 percent for fertilizer and the remaining 5 percent for industries and households. Gas is transported via a network of gas pipelines from offshore gas fields to onshore processing facilities and power complexes
In 2009, three new oil wells were put into production including Bunga Orkid, Nam Rong-Doi Moi and Dong Rong. In 2010, Petrovietnam plans to start drilling six new oil wells. However, PetroVietnam has also invested $600 million in 21 overseas projects. Along with three gas pipelines Bach Ho, Nam Con Son and Ca Mau, PetroVietnam is building the fourth pipeline from the Thai frontier to Can Tho Province’s O Mon and also the second Nam Con Son pipeline to drill gas in West Ocean and Nam Con Son basin. Cite the Chevron deal here. Vietnam’s domestic demand for crude oil and gas in the future is expected to increase, especially as the country expands refinery capacity.
After an eight-year delay, in November 2005, PetroVietnam started construction of its first oil refinery at a cost of $3 billion with a capacity of 6.5 million tons per year in Dung Quat, Quang Ngai Province (central Vietnam). Operational as of February 22, 2009, the Dung Quat refinery uses local feedstocks from the Bach Ho field and imports from the Middle East. Dung Quat refinery achieved 100 percent capacity in January 2010. Petro Vietnam plans to raise the capacity of Dung Quat Refinery from 6.5 million tons to 10 million tons.
In April 2008, Vietnam began the construction of the $8 billion Nghi Son Refinery and Petrochemical complex in Nghi Son, Thanh Hoa Province in the North. The complex is under construction and will be able to process 8.4 million tons of crude oil per year when it is scheduled to come on-stream in 2013.
The third refinery, scheduled to be constructed in 2010 and operational in 2014, is the Long Son Refinery Ba Ria-Vung Tau Province in the South. Long Son Refinery needs investment capital of $5 billion and will be able to refine 10 million tons of crude oil per year.
Under its WTO commitments, the Vietnamese government has opened its oil and gas sector to foreign companies, which it hopes will bring in capital, expertise and technology to help achieve the country’s major industry goals. Over the last few years, the government has made visible efforts to make the sector more attractive to foreign companies, by enacting the amended Petroleum Law in 2008, instituting management reforms at PetroVietnam, and cracking-down on business corruption. Foreign oil and gas companies active and successful in Vietnam include ConocoPhillips, British Petroleum (BP), Chevron, Talisman, KNOC (Korea), ONGC Vadesh (India), Idemitsu (Japan), Zarubezneft (Russia), and Petronas Carigalli (Malaysia).
In December 2009, the Vietnamese Government issued Decree 115, essentially supplementing the 2008 Petroleum Law and the 2001 Petroleum Bidding Regulation. The decree outlines the kinds of entities that are allowed to conduct business in the petroleum sector, and confirms that only PetroVietnam and its subsidiaries may conduct exploration activities as primary contractor. The decree outlines licensing processes, tax issues and bidding regulations. A number of decrees delineate surcharges on profit oil and other regulations for this sector, and U.S. entities in this field are encouraged to engage competent legal counsel as they develop their market-entry strategies.
According to Vietnam’s Oil and Gas Master Plan toward 2015 and vision to 2025, the industry will require an investment of $203 billion to achieve the goals set forth by the government for the 2006-2025 period, in which PetroVietnam’s share will be $81.54 billion (accounting for 40 percent).
These policies, as well as the recent positive developments in the oil and gas sector, have generated a steadily increasing demand for equipment and services that will continue in the years to come.
American technologies, expertise and experience are well respected in the oil and gas industry in Vietnam. U.S. companies are highly competitive in supplying sophisticated equipment, advanced technologies and professional services to both new and existing projects.
Significant business opportunities for U.S. companies exist in the upstream, midstream and downstream segments of the oil and gas industry. More details on investment opportunities and a list of specific upcoming projects in the oil and gas sector will be provided to U.S. companies upon request. Potential buyers include PetroVietnam and its subsidiaries, joint ventures and affiliates, as well as foreign oil and gas companies operating in Vietnam, which normally prefer sourcing from the U.S., Europe and Japan.