March 5-7, 2003  |   The Melia Hanoi Hotel  |  Hanoi, Vietnam

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Petrovietnam as a National Energy Security Assuring Factor

Nguyen Xuan Nham
President and CEO, PetroVietnam

Petrovietnam as a National Energy Security Assuring Factor Established in 1975, Petrovietnam is a national oil company which reports directly to the Prime Minister and operates virtually in all areas of the energy sector, including petroleum exploration, production, storage, transportation; consulting, engineering, construction, shipping, financial and insurance services; processing, distributing oil and gas products, maintaining and operation of power and fertilizer plants. With such diverse operations and a tight engagement in the country's energy sector, Petrovietnam has been playing an exceptionally important role in assuring national energy security for the country's development. With the country's GDP growing at rates of 7-7.6 % per year, the country's energy demand is projected to grow at a rate of 10% per year. This constitutes a huge opportunity and at the same time, a huge challenge for Vietnam's petroleum industry.

1. Overview of the Current Status of the Petroleum Industry

In the area of exploration, in a bid to evaluate the country’s oil and gas potential as well as to increase the proven reserves by new discoveries to meet the country’s oil and gas demand, Petrovietnam has been expanding the overall exploration acreage by way of entering into production sharing contracts or joint ventures with foreign oil companies, and timely bringing newly discovered fields into production with state-of-the-art technology. Vietnam is estimated to have recoverable reserves of 3000 to 4000 mcm of oil equivalent, which includes around 900 to 1200 mcm of crude oil and 2100 to 2800 bcm of gas. Among the 50 structures that have oil and gas discoveries, there are 20 commercial fields such as Bach Ho (White Tiger), Rong (Dragon), Dai Hung (Big Bear), Rang Dong (Aurora), Hong Ngoc (Ruby), Su Tu Den (Black Lion), Su Tu Vang (Yellow Lion), Lan Tay (West Orchid), Lan Do (Red Orchid), Hai Thach, Rong Doi (Twin Dragon), etc.

Vietnam started to produce crude oil in 1986 with the increasing output as illustrated in Figure 1.
Figure 1- Crude Oil Production Profile, 1986-2002
Unit: million tons
Figure 1- Crude Oil Production Profile, 1986-2002

To the end of 2002, Petrovietnam produced more than 100 million tons of crude oil, which means a substantial contribution to the country’s foreign currency earnings as well as state budget. Current producing oil fields include Bach Ho, Rong, Dai Hung, Rang Dong, Hong Ngoc and Bunga Kekwa. The Su Tu Den field within block 15.1 is set to begin production by the end of 2003. Figure 2 reveals that Vietnam is a net exporting country based on annual crude oil production and petroleum product consumption figures.

Figure 2-Petroleum Product Import vs. Crude
Unit: million tons
Figure 2-Petroleum Product Import vs. Crude Oil Export

In the meantime, Petrovietnam has begun to expand its activities overseas, this includes exploration and production contract signing in Iraq and Algeria, and share acquisition from international oil companies in Mongolia and Malaysia.

Apart from oil, associated gas has been gathered and transported ashore to feed power plants since 1995, and subsequently a gas processing plant has been put into operation since 1998 bringing new products into the market: LPG and condensate. To date, the gathering, transporting and processing system of associated gas from Bach Ho and Rang Dong oil fields has been completed with the capacity of 2 bcm per year capable of supplying 1.7 bcm of dry gas, 350 thousand tons of LPG and 130 thousand tons of condensate for domestic use.

At the same time, in order to utilize the vast potential of natural gas, Petrovietnam has been actively taking part in Nam Con Son and South-West Gas production and transportation projects with foreign partners.

The gas development complex at Lan Tay field of block 06.1, Nam Con Son Basin with the output of 2.7 bcm per year and a gas pipeline of 400 km long with maximum capacity of 7.5 bcm per year, a gas processing station at Dinh Co and a gas distribution center at Phu My were completed in November, 2002. Thus, starting from 2003, the total gas supply of Vietnam has been added with 2.7 bcm per year, capable of supplying enough gas to Phu My power generation complex which has a generating capacity of 4000 MW once completed in 2004.

In addition, as part of the South-East gas market expansion plan and in order to facilitate development of Rong Doi and Hai Thach gas fields, Petrovietnam is preparing to build gas pipeline from Phu My to Ho Chi Minh City to supply gas to Thu Duc, Hiep Phuoc power plants and future Nhon Trach power plants as well as to other industrial consumers.

In the South-West part of the country, Petrovietnam is developing the Ca Mau gas-power-fertilizer complex, which comprises a 332 km-long gas pipeline from PM 3 CAA field offshore to Ca Mau with a capacity of 2 bcm per year, a 720 MW power plant, and a fertilizer production plant with a capacity of 800,000 tons per year. With the start-up by the end of 2005, the Ca Mau complex will create a 1.5 bcm gas market for Bunga Kekwa field of Block PM3 CAA and Cai Nuoc field of Block 46 Cai Nuoc.

The recent efforts by Petrovietnam in the gas industry have created a noticeable shift in the country’s energy production balance. In 2002, the electricity output generated from gas fired power plants accounted for 17% of the total power generation of Vietnam. (Figure 3). It is projected that this ratio will be much higher in the coming years and will reach beyond 40% by the year 2010.

Figure 3-Hydropower, Gas Turbine and Thermal
Figure 3-Hydropower, Gas Turbine and Thermal Power Generating Ratios in 2002

In addition, to meet the market’s demand for petroleum products, Petrovietnam is expediting the Dung Quat Refinery Project in Quang Ngai province which has a processing capacity of 6.5 million tons of crude oil per year. Feasibility study for another refining – petrochemical complex in Nghi Son, Thanh Hoa province with the same processing capacity is also being carried out. These projects once completed will be capable to meet almost domestic demand for refining and petrochemical products.

On the other hand, appropriate attention has been paid to expanding market share in distributing LPG and other petroleum products for industrial and domestic consumption. A system of petroleum storages and LPG terminals has been set up in Ho Chi Minh City, Hai Phong, Vung Tau, Can Tho, Nam Dinh, and Tay Ninh provinces. The market share acquired by Petrovietnam for retail sale and wholesale of LPG is 20% and 70%, respectively.

2. Development Orientation and the National Energy Security Ensuring Objectives

Stemming from the major economic development guidelines mapped out by Vietnam’s Communist Party and Government, the development objective of Petrovietnam set for the year 2020 is to turn itself into a strong industrial, commercial and financial business group, having diversified activities, actively participating in the regional and international integration, ensuring national energy security, and capable to meet a major part of the country’s petrochemical products demands while protecting nation’s sovereignty, natural resources and environment.

In the area of exploration and production, Petrovietnam will continue the policy of attracting foreign investment to open acreages, providing investment incentives for deep water and remote blocks with sophisticated geological conditions pursuant to the Petroleum Law and Decree 48/2000/ND-CP of the Government.

Despite the fact that the exploration and production activities have been accelerated in recent years, the oil and gas potential remains vast, with two third of the country’s territory being unexplored and this is a huge opportunity for foreign investment in any form, including PSC, JOC, JV, or BCC.

In the coming years, Petrovietnam will accommodate its own resources as well as attract more foreign investment to increase proven reserves and sustain annual production of 18 to 20 million tons of crude oil by the year 2010.

To exploit the huge potential of natural gas, Petrovietnam will coordinate with the Government agencies to issue policies for developing the gas market. The first priorities for Petrovietnam at present is to complete the Ca Mau gas-power-fertilizer complex as scheduled, to develop gas fields in Nam Con Son Basin such as Rong Doi, Rong Doi Tay, Hai Thach, Moc Tinh to study and develop gas fields in block B, 48/95, 52/97 of Malay-Tho Chu Basin and the gas transportation system from block B to Omon, and, at the same time, to accelerate the gathering and utilization of associated gas with the aim of producing of 10 to 12 bcm by the year 2010 (see Figure 4).

Unit: bcm
Figure 4-Projected Gas Output by the Year 2010

In the coming years, Petrovietnam will prepare to increase the percentage of electricity generated from gas fired power stations with the aim to maintain at a level of approximately 40% in 2020 (Figure 5).

Figure 5-Percentage of Electricity Generated from Gas Turbines

To ensure national energy security for economic development, Petrovietnam will accelerate investment in downstream sector. With the completion of the refining projects such as the Dung Quat refinery and Nghi Son refining – petrochemical complex, by 2010 Petrovietnam will be able to meet 60 to 70% of domestic demand for petroleum products. (Figure 6). At the same time, Petrovietnam is continuing to develop and modernize the distribution network in order to increase the market share of products retail sales.

Unit: Million Tons
Figure 6-Refining Products Supply and Demand Balance

Apart from domestic operations, Petrovietnam is also step by step expanding its activities overseas, taking part in developing a TransASEAN gas pipeline.

With a series of large-scale investment projects under a dynamic development program, Petrovietnam is a reliable partner to cooperate on mutually profitable principles, for world peace and betterment.