According to Nguyen Vu Truong Son, general director of Vietnam National Oil and Gas Group (PVN), the current mechanism of attracting foreign investment in oil exploration is outdated and no longer effective as the Law on Petroleum was built in 1993 and then revised in 2008.
Bach Ho (White Tiger) field can only be explored in the next 4-5 years
In addition, the Public Investment Law also restricts the money available for exploration activities, Son said, adding as a result, foreign investors have spent US$45 billion on exploration but they have brought just US$21 billion back to their countries.
The oil price decline is also another cause for a decreasing investment in the oil exploration industry. In previous years, PVN often invested over US$2 billion to drill 30-40 oil wells and replenish its oil reserves by 35-40 million tons per year, but from 2015 onwards, investments from the group and its foreign partners have decreased by five times.
Meanwhile, Son said, the exploration and exploitation of oil fields in Vietnam are no longer easy as before because major oil fields near the shores are close to exhausting production.
According to Son, most of the oilfields have been exploited for many years and are in their final stages, with production declining by 15-30 percent per year. The Bach Ho (White Tiger) field, the country’s largest and longest-producing oilfield, contributing about 60 percent of the nation’s total oil production for PetroVietnam, is in a state of depletion and can only be explored in the next 4-5 years.
In addition, the rapid flooding, at over 60 percent, in many fields due to intensive exploitation, such as Hai Su Trang (White Sea Lion), Te Giac Trang (White Rhino), Su Tu Vang (Yellow Lion) and Rang Dong (Dawn), is posing a challenge that may reduce oil production in the coming years, Son said.
Incentive policies proposed
Under the development strategy of the oil and gas industry towards 2025, the industry aims to annually increase oil and gas reserves to 35-40 million tons, and oil and gas exploitation by 10-36 percent for each five-year period, of which the exploitation from overseas oil field must be 3 to 5 times higher than the current levels.
The industry thus needs to attract foreign investments to meet the targets as domestic funds are limited.
In order to convince foreign investors to take a risk on exploration, Son said that the National Assembly should revise the Law on Petroleum with permission for PetroVietnam to use 50 percent of its post-tax profits to continue operations and contribute to the state budget through exploration.
Besides, the policy for attracting foreign investment must be revised to bring the production sharing contract in line with Vietnam’s priorities, said Son.
Echoing Son, chairman of the Vietnam Petroleum Association Ngo Thuong San also proposed revising the law to stimulate foreign investment, get more out of mining sites and invest in the development of offshore oil fields.
While the industry waits on new permanent regulations, San suggested that the government and the Ministry of Industry and Trade should release provisional regulations with focus on shortening the approval process for oil and gas fields to ensure that exploration keeps up with demand.
Procedures must be simplified, and incentives must be introduced to give foreign and domestic investors a reason to develop smaller fields, San recommended, adding that progress can also be aided by investing in technology to increase oil output from each site.