Oil

Oil & Gas Industry Under Review

Since the first export shipment in April 1987, crude oil has earned over US$17 billion for Vietnam. The oil and gas industry is also the country's biggest foreign currency earner, which contributes US$1 billion to the state burse every year.

Vietsovpetro is the country's largest oil and gas business, which is exploiting three oil wells, Bach Ho, Rong and Dai Hung, at a rate of 280,000 barrels/day (some 38,000 tonnes). Bach Ho is Vietnam's largest oil well with a total reserve of 300 million tonnes. Rang Dong is the second largest from which 55,000 barrels are exploited per day. Hong Ngoc follows with 30,000 barrels each day.

According to sources from the Vietnam Petroleum Corporation (PetroVietnam), in 2001 Vietnam produces some 16.2 million tonnes of crude oil. If the 1.5 billion m3 of gas convertible to oil is taken into account, this year's oil production will be less than 18 million tonnes, below the target of 20 million tonnes, a figure hoped for six years ago. This forecast was based on optimistic estimation of the reserve of Dai Hung and Thanh Long.

Foreign oil experts then thought at least 100 million tonnes of oil could be exploited from Dai Hung and a huge reserve would be found at Thanh Long. The reality had quite a different story, though.

Vietsovpetro is currently exploiting between 500-600 tonnes per day from Dai Hung. Meanwhile, test drills showed only a modest gas reserve at Thanh Long, which forced Mobil of the U.S. to pull out of the project.

In mid-November, Vietsovpetro will welcome its 100 millionth ton of oil offshore Vietnam. However, the joint venture reaches the production peak at Bach Ho this year. Nguyen Xuan Nham, PetroVietnam general director, said Bach Ho may sustain the current production in five years and then production will slash drastically. Vietnam's hard currency supplies depend heavily on oil export. So the question now is whether in the post-Bach Ho period Vietnam can discover another oil well of the same scale to maintain an annual production of over 16 million tonnes.

After the first oilfield was discovered in Vietnam, the oil and gas industry has signed 45 contracts to explore and exploit oil and gas with foreign companies. Spending billions of U.S. dollars, they have found some oil wells such as Dai Hung, Hong Ngoc, Rang Dong, Bunga Kekwa and several gas wells. The most recent discoveries involve Su Tu Den and Su Tu Vang with a total reserve of some 100 million tonnes, second only to Bach Ho.

Overall, investors estimate Vietnam has a confirmed oil and gas reserve of 1.1 billion tonnes, which comprises 600 million tonnes of natural gas (1,000m3 of gas equivalent to 1 tonne of oil) and 500 million tonnes of crude oil. Discovered gas wells with commercial value include Lan Tay, Lan Do, Hai Thach, Rong Doi, Rong Doi Tay, Moc Tinh, Hai Au and others. Vietnam has about 3 billion tonnes of oil and gas, according to experts. Despite promising potential, the possibility of discovering new oil wells, especially big ones, has become smaller.

To date, figures show that the potential area centers on the Cuu Long sedimentary basin where Bach Ho, Dai Hung, Rong, Hong Ngoc, Rang Dong, Su Tu Den and Su Tu Vang were found. Most of this area has been contracted to foreign partners. On other areas of the continental shelf, said PetroVietnam, the natural gas potential is greater. It can be concluded that most of the 2 billion tonnes of underground oil and gas will be in gas wells. If Vietnam is to exploit and export gas, it needs tremendous capital to build gas pipelines. There remains an open question. That is whether these gas wells are big enough for pooling in hundreds of millions of or billions of U.S. dollars to install the required pipelines.

So far, the biggest gas wells ever found in Vietnam-Lan Tay and Lan Do in the Nam Con Son basin-have a total reserve of only 58 billionm3. Fortunately, in Nam Con Son, contractors have found other gas wells not far from Lan Tay and Lan Do. It was this discovery that has promoted PetroVietnam and BP of the UK and Statoil of Norway to invest in building the 399-km Nam Con Son pipeline. Likewise, gas wells in the southwest and the south are close together-a condition which leads to PetroVietnam's decision to erect a pipeline to transmit gas to the Khanh An Industrial Park in Ca Mau Province.

Intensive operations

Vietnam's oil and gas industry expects to obtain some 20 million equivalent tonnes of oil in 2001, and sets target to reach 22-24 million tonnes by 2005. To achieve such a target, the corporation is carrying out various investment and trading projects.

Boosting exploitation of potential oil fields

According to PetroVietnam's estimation, Bach Ho oil field has reached its top capacity with an annual exploited volume of 13 million tonnes. The capacity could reduce gradually in the years after 2004 or 2005. Therefore, PetroVietnam is evaluating the current situation and the actual potential of Bach Ho oil field to have suitable solutions to maintain its capacity.

In addition to accelerating the exploitation of the existing oil fields such as Rong, Rang Dong, Ruby, Bunga Kekwa (Block PM3) and Dai Hung, PetroVietnam and its partners are speeding up the operations of newly discovered oil fields with commercial reserves such as Lan Tay-Lan Do (Block 06.1), Hai Thach (Block 05.1), Moc Tinh (Block 05.3), Block 11.2 and Emerald.

PetroVietnam particularly considers Su Tu Den oil field prospective with a reserve inferior only to Bach Ho (according to an announcement of the joint venture, the estimated reserve may reach 35 million tonnes). Su Tu Vang oil field is also attractive with a reserve a little smaller than Su Tu Den but its daily exploited volume is the same. These two oil fields belong to a venture involving PetroVietnam (holding a 50% stake), Conoco (the U.S., 23.25%), KNOC (South Korea, 14.5%), SK (South Korea, 9%) and Geopetro (Monaco, 3.5%).

So far, more than 90,000 tonnes of oil have been exploited from Dai Hung oil field. However, according to Dao, the venture still continues to explore the actual reserve of the oil field, which is believed to be fairly big. Not only joint venturing to share risks and profits, PetroVietnam also asks for the government's permission to conduct some exploration projects by itself in the Gulf of Tonkin, the Red River Delta and the Mekong Delta.

Together with oil exploitation projects, PetroVietnam invests substantially in gas exploitation, including the gas supply network (phase 1), Dinh Co gas compression station, and the gas collection system in the Mekong basin with the Rang Dong-Bach Ho gas pipeline network.

Boosting outbound investment

According to Dao, in a bid to develop business, PetroVietnam has decided to boost its investment and cooperation abroad from this year through an oil and gas exploration and exploitation venture project with Malaysia. Of the two projects in which the joint venture holds a 4.5% stake, one has been discovered to have commercial reserves. Another investment project in Tamtsag (Mongolia), which PetroVietnam holds a 5% stake, has been discovered to have oil and gas.

A series of new contracts of PetroVietnam in Southeast Asia, South Asia, the Middle East and Africa are under negotiation. The most significant investment abroad is a tripartite project among PetroVietnam, Petronas (Malaysia) and Pertamia (Indonesia). Vietnam having the block under exploitation will hold a 40% stake and be allowed to manage the venture (each of the other countries holds a 30% stake).