Vietnam
Still Holds Much E&P Opportunity
Gas and condensate production facilities in
the Hai Thach-Moc Tinh field of the Nam Con
Son Basin. Photos courtesy of Petrovietnam.
A
s oil companies struggle with
the collapse in crude prices
and industry upheaval, assess-
ing the future of exploration and produc-
tion (E&P) in specific countries requires
a longer term vision of a market in which
prices will have stabilized and rebounded
to a level yet undetermined. Seen in this
lengthier view, Vietnam holds substantial
E&P opportunity because of its resource
potential, its expanding economy and
surging internal energy demand, the
diverse group of global operators active in
the country, and the interest of national oil
company Petrovietnam in expanding part-
nerships with international E&P players.
At the same time, a limitation on this
upside lies in the dispute between Vietnam
and China over territorial waters, which
is affecting international investment in
some E&P prospects. While sporadic ten-
sions have arisen between the countries,
Vietnam and China remain in discussions
over the disputed areas. A peaceful reso-
lution could benefit both countries and
the oil and gas industry. Notably, well to
the north of the disputed waters, Petro-
vietnam and China National Offshore Oil
52
Company have a joint exploration agree-
ment covering the Gulf of Tonkin.
In the decades since the end of the Viet-
nam War, exploration and development in
Vietnam have grown by leaps and bounds.
With 4.4 billion bbl of oil reserves, the
country now ranks No. 3 in the Asia-Pacific
region, trailing only China and India.
Always an Interest
“Vietnam has always been an interest
among international oil and gas com-
panies,” said Suraya Tulot, Vietnam EP
upstream researcher at IHS. “It is an
opportunity that companies are looking
at, especially the independents.”
Almost all of Petrovietnam’s domestic
upstream activity has been offshore in
shallow water. From the beginning, the
Cuu Long Basin has been the center of
Vietnamese E&P. However, activity has
spread to the Nom Con Son, Song Hong,
Phu Khanh, Phu Quoc, and Malay-Tho
Chu basins, as well as others, and deep-
water development is getting under way.
“Vietnam is relatively underexplored,”
Tulot said. “While the focus has been on
Cuu Long, there are opportunities in the
Joel Parshall, JPT Features Editor
Nam Con Son and Song Hong basins and
elsewhere.” Petrovietnam’s Ky Lan 1X gas
discovery in the Song Hong Basin late
last year is one example. That success
has piqued interest among other com-
panies. Eni and KrisEnergy have recently
acquired exploration blocks in the vicinity.
Bach Ho Proves a Tiger
Oil and gas E&P activity in Vietnam began
in the 1960s in the onshore Hanoi Trough
formation. Attention later shifted to off-
shore prospects. The first major success
occurred in 1986 with the discovery of
oil at the Bach Ho (White Tiger) field in
the Cuu Long Basin by Vietsovpetro, a
joint venture (JV) formed in 1981 between
Zarubezhneft of the former Soviet Union
and Petrovietnam. Initial production
flowed from a Lower Miocene structure.
However, deeper drilling into fractured
granite basement rock yielded a much
larger discovery, which was brought into
production in 1988.
Granite basement rock is nonsedimen-
tary and usually not associated with oil
and gas accumulations. However, in some
cases this rock can hold hydrocarbons
JPT • MARCH 2016

A producing platform operating in
the Dai Hung oil and gas field of the
Nam Con Son Basin.
that have migrated from nearby source
rock. While fractured granite basement
reservoirs have low permeability, migrat-
ed hydrocarbons can accumulate in the
natural fracture networks. But these res-
ervoirs are challenging to understand
because of their heterogeneity, and drill-
ers in the past had typically avoided them
in favor of less-complicated targets.
The success at Bach Ho put the Viet-
namese oil industry in the position of
learning how to produce from a frac-
tured granite basement, and the Cuu
Long Basin has an abundance of these
reservoirs. Bach Ho became a prolific
field, peaking at more than 260,000 B/D
of production in 2001, and it is still pro-
ducing 75,000 B/D.
The Vietnamese industry has become
the global authority on producing oil
from fractured granite basement rock,
and more than 1.7 billion bbl of oil have
been produced from the country’s gran-
ite basement reservoirs through last year.
Although basement production will not
contribute as much in Vietnam’s future,
it will still play an important role in the
country’s E&P activities for years to come.
Since the early success at Bach Ho,
Vietnamese production has greatly
expanded. Petrovietnam, including JVs,
now produces oil and/or gas from almost
40 fields in granite basement and sedi-
mentary reservoirs. That number takes
in several international fields in Malay-
sia, Russia, Algeria, Peru, and Venezuela
54
in which Petrovietnam holds interests. By
itself, the company generates about 25%
of Vietnam’s gross domestic product.
Many Global Companies
Approximately 30 operating companies
from all parts of the world are active in
Vietnam, with companies representing
the United States, Spain, Italy, the Unit-
ed Kingdom, France, Russia, Australia,
Japan, Malaysia, and other East Asian
and Middle Eastern countries. Among
the companies are ExxonMobil, Murphy,
Repsol (through its recent acquisition of
Talisman), Soco, Gazprom, Rosneft, San-
tos, Mitsui, and Petronas.
In a number of cases, Petrovietnam
has formed JVs with international E&P
firms to operate certain projects. The old-
est and largest of the JVs is Vietsovpetro.
More than 25 international service com-
panies and equipment suppliers are also
active in the country.
“Vietnam has become very welcom-
ing of international partners to help
with upstream opportunities,” said Joe
Knierien, executive director at Globalinx
Group, a business development firm that
is very active in Vietnam. “The Vietnam-
ese are very interested in the latest tech-
nology to help them achieve their goals,
and experience such as that of the US
companies in deepwater development
will be especially beneficial as Vietnam
moves into some of those projects.”
Production Increases
Vietnam’s oil production (including con-
densate) has increased modestly over the
past 3 years to 339,800 B/D in 2015.
However, with an expanding and indus-
trializing economy that grew by nearly
7% last year, refined product demand
was the equivalent of 476,800 B/D of
crude oil. The country made up the dif-
ference by importing products. Although
Vietnam exports some oil, it is a net
importer because its exports are more
than offset by the imported product bar-
rels. The excess of product demand over
oil production is expected to continue.
Natural gas production in Vietnam has
been rising over the past 4 years and
last year amounted to 1.03 Bcf/D. The
country’s reserves of 23.9 Tcf are ranked
fourth in East Asia behind China, Indo-
nesia, and Malaysia. Vietnamese produc-
tion is expected to increase in the next
5 years as major field developments come
on line. All of the country’s gas produc-
tion goes to domestic consumption.
Petrovietnam has signed a memoran-
dum of understanding (MOU) and front-
end engineering and design contract
with Tokyo Gas for the construction of a
liquefied natural gas (LNG) import termi-
nal at Thi Vai near Ho Chi Minh City and
is considering building additional LNG
import facilities.
The country’s oil production is project-
ed to decrease slightly this year and next
because of declines at some major fields
and the effects of reduced exploration,
according to Petrovietnam Vice President
Nguyen Quoc Thap. There were five explo-
ration wells drilled last year (not includ-
ing appraisal wells), compared with 12 in
2014. However, with planned output from
the Ca Rong Do (Red Emperor) deepwater
project, the Su Tu Trang (White Lion)
field, and potentially some smaller fields,
production is expected to resume growth
in 2018 and 2019, Thap said.
Assessing the Variables
After 2019, more variables come into
play if Vietnam is to be able to sustain
or increase current levels of production.
Prices will play a major role and prob-
ably already have had an impact by scal-
ing back the exploration activity typi-
cally needed to offset depleting reserves
from producing fields. Only two explora-
tion blocks were awarded by Vietnam in
last year’s offshore licensing round, well
below awards in previous rounds during
recent years.
Vietnam’s deepwater prospects repre-
sent a small part of the country’s offshore
acreage but could hold the key to sustain-
ing production. The prospects lie mainly
in the Phu Khanh and Tu Chin-Vung May
basins and parts of Nam Con Son.
Oil prices will be critical to future
investment. Industry analysts estimate
that Vietnam has a breakeven oil price
of about USD 55/bbl for new small-to-
medium projects in shallow water. New
deepwater oil projects would target much
larger reserves but likely require a higher
price forecast to justify a final investment
decision (FID).
JPT • MARCH 2016
Moving Forward
Looking ahead, operator Repsol is devel-
oping the Ca Rong Do oil and gas con-
densate field in Block 07/03 of the Nam
Con Son Basin. In more than 1,100 ft of
water, it will be Vietnam’s first deepwater
project and feature the country’s first
tension-leg platform.
First production from Ca Rong Do is
slated for October 2018. At its peak, the
field will produce 30,000 B/D of oil and
50 MMcf/D of sales gas. Estimated recov-
erable reserves are 50 million bbl of oil
and 2 million to 4 million bbl of conden-
sate. In addition to Petrovietnam, Pearl
Oil (a unit of Mubadala Petroleum), and
Pan Pacific are participating in the project.
Other projects in progress are:
◗ First-phase expansion of the Su
Tu Trang gas condensate field in
Block 15-1 of the Cuu Long Basin,
scheduled for completion in the
fourth quarter. Gas production of
50 MMcf/D will be increased to
150 MMcf/D, with 100 MMcf/D
injected into the reservoir to boost
current condensate production of
7,000 B/D to 20,000 B/D. Operated
by the Cuu Long Joint Operating
Company, Su Tu Trang’s participants
are Petrovietnam, Perenco, ONGC
Videsh, and Korea National Oil
Corporation.
◗ The Thien Ung gas development
in Block 04-3 of the Nam Con Son
Basin. First gas is expected in the
third quarter, with production to
peak at 65 MMcf/D of sales gas.
Operated by Vietsovpetro, the
participants are Petrovietnam and
Zarubezhneft.
◗ The Southwest Gas development
in Block B, 48/95 and 52/97, of
the Malay-Tho Chu Basin, with
estimated probable recoverable
reserves of 3.8 Tcf. Production is
expected to start in 2020 and peak
at 575 MMcf/D of sales gas. Operated
by Phu Quoc Petroleum Operating
Company, the participants are
Petrovietnam, PTTEP, and Mitsui.
◗ The Ca Voi Xanh (Blue Whale) gas
project on Blocks 117–119 of the
Song Hong Basin. Estimated to hold
between 5.67 Tcf and 12.57 Tcf of
natural gas in place (with estimated
JPT • MARCH 2016
A Petrovietnam jackup rig drilling in the Dai Hung field.
recoverable reserves of 3 Tcf to
8 Tcf), Ca Voi Xanh represents
the biggest gas discovery in
Vietnam’s history. ExxonMobil
and Petrovietnam are partners in
the project, with ExxonMobil the
operator. The two companies signed
an MOU July of last year to move
forward with development plans
but an FID has not been made. If
sanctioned, the project would be
anticipated to produce first gas
in 2023.
New marginal developments will also
be important to Vietnam’s oil and gas
future, as a number of potential proj-
ects exist. Vietnam may need to enhance
development incentives, possibly through
changing project tax treatment and/or
adopting new models for production
sharing contracts.
Petrovietnam is also investigating the
potential of shale and coalbed methane
development in the Hanoi Trough. Joint
exploration studies with Eni, Arrow, Keep-
er, and other companies are in progress.
A Lot Going for Vietnam
Despite some question marks, Vietnam’s
oil and gas industry has a lot going for it
because of its strong technical capabil-
ity and the country’s prospects for robust
economic growth and hunger for energy.
On a net basis, Vietnam will continue to
need every barrel of oil and cubic  foot
of gas that it can produce. Petroviet-
nam will likely approach that goal with
vigor, as its willingness to boost pro-
duction by participating in foreign E&P
projects attests.
The company also is building a refining
and petrochemical complex at Nghi Son,
which will be the country’s largest. A joint
investment of Petrovietnam, Kuwait Oil,
Idemitsu, and Mitsui, the USD 9 billion
facility will start up in 2018. With a crude
oil processing capacity of 200,000 B/D,
the complex will supply 40% of Viet-
nam’s refined product demand. While
the combined output of Nghi Son and
Vietnam’s sole other refinery at Dung
Quat will fall well short of meeting the
country’s surging product demand, the
new complex will facilitate the further
industrialization and modernization
of© Vietnam.
“What’s driving the need for more
energy right now is the upcoming Trans-
Pacific Partnership agreement between
12 countries (including Vietnam) that is
expected to be signed this year,” Knierien
said. “So there is a tremendous amount
of growth in anticipation of the new trade
agreement. Looking farther ahead, the
country needs more power, more ener-
gy, and more fuel to provide electricity,
to develop more manufacturing capacity,
the roadways, the pipelines, and all the
infrastructure it needs.”
In short, oil and gas will continue to
be a top priority for Vietnam, and global
companies seeking to invest their funds
and expertise in the country’s E&P oppor-
tunities will be most welcome. JPT
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