Oil rigs on the Bach Ho oil field. Vietnam's crude oil production is forecast to continue to drop over the coming years (Photo: VNA) Hanoi (VNS/VNA) - Vietnam’sself-sufficiency for crude oil could come to an end due to exploitationthat could turn the country into a net importer of crude oil for thefirst time, experts warned.
According to analysts from theFitch Solutions Macro Research, crude oil production in Vietnamwould continue to drop over the coming years, averaging annual declines of4-5 percent over the next 10 years, as offshore reserves fell andinvestment in significant new projects slowed.
Data from the General StatisticsOffice showed thecountry produced some 247,000 barrels per day (b/d) last year, a decrease ofnearly 12 percent on year, some way short of State-owned Vietnam Oil and Gas Group (PetroVietnam)'s target of 14.2 million tonnes, equivalent to 285,000b/d.
PetroVietnam has also maintaineda pessimistic outlook towards the sector, forecasting in late-2018 its crude oil production to decline byas much as 10 percent annually to 2025, as output declines from some of its most mature domestic fields, namely Bach Ho - Vietnam's largest oilfield and responsible for 60 percent of total production.
According to experts, the start of Ca Tam oil field, a satellite development for the aging Bach Ho, in February could seea modest uptick in near-term output as it ramps up to peak output of 23,000 b/d, although it would still be insufficient to stem the broader structural decline.
“Nascent efforts by theGovernment to revise the outdated domestic oil and gas law, and introduce better incentives for upstream contractors, could go a long way toreigniting investor sentiment into Vietnam’s oil and gas, though contribution to future oil output growth could be limited, given the gas-heavynature of PetroVietnam’s current projects pipeline,” Fitch’sanalysts said, noting the result would see Vietnam’s self-sufficiency in crudeoil come to an end.
In fact, Vietnam’s crude oilimports expanded by more than three times in 2018 to 5.3 million tonnes, andlook poised to expand further over the coming years following the fullcommissioning of Nghi Son, the country’s second refinery and petrochemicalscomplex.
Meanwhile, crude oil exportsheaded in the other direction, declining by 41 percent on year, mirroring thedeclines in domestic production.
After running at an averageoperating rate of 103 percent last year, the Dung Quat oil refinery is expectedto continue to maintain elevated runs, both to meet strong domestic demand andto fend off competition from Nghi Son.
Fitch’s analysts also said theoutlook for refining capacity growth in Vietnam remained upbeat, although thiswould come at the cost of even greater dependence on crude oil imports goingforward.
They explained that following afinal investment decision in 2017, the long-delayed construction of the 200,000b/d Long Son refining and petrochemicals complex is finally underway,spearheaded by Thailand’s Siam Cement Group (SCG), the third stand-alonefacility marked down for start-up in 2023.
In addition, Dung Quat refineryoperator Binh Son Refining and Petrochemical Company (BSR) is also movingforward with steps to upgrade and expand its facility for 1.8 billion USD by2021, securing an environmental impact assessment from the Ministry of NaturalResources and Environment in March.
In light of a widening domesticcrude deficit, Vietnam unveiled plans to manage its oil import bill by maximisingexports of its low sulphur Bach Ho crude, which often fetches a strong premiumin the Asia crude market while substituting crude feedstock for own consumptionwith competitively priced US crude.
As for crude oil imports, Vietnamis just one of a growing number of countries in Asia that are opening theirdoors to more US crude inflows, both to capitalise on favourable US-Asiaarbitrage, but also to deepen energy ties and improve trade relations with theUS.
PetroVietnam received its first-evercargo of US crude in May, comprising of 950,000bbl (barrels) of US West TexasIntermediate (WTI). Experts said more imports could be on the cards, dependingon prices and the grade’s compatibility with the refinery.-VNS/VNA
According to analysts from theFitch Solutions Macro Research, crude oil production in Vietnamwould continue to drop over the coming years, averaging annual declines of4-5 percent over the next 10 years, as offshore reserves fell andinvestment in significant new projects slowed.
Data from the General StatisticsOffice showed thecountry produced some 247,000 barrels per day (b/d) last year, a decrease ofnearly 12 percent on year, some way short of State-owned Vietnam Oil and Gas Group (PetroVietnam)'s target of 14.2 million tonnes, equivalent to 285,000b/d.
PetroVietnam has also maintaineda pessimistic outlook towards the sector, forecasting in late-2018 its crude oil production to decline byas much as 10 percent annually to 2025, as output declines from some of its most mature domestic fields, namely Bach Ho - Vietnam's largest oilfield and responsible for 60 percent of total production.
According to experts, the start of Ca Tam oil field, a satellite development for the aging Bach Ho, in February could seea modest uptick in near-term output as it ramps up to peak output of 23,000 b/d, although it would still be insufficient to stem the broader structural decline.
“Nascent efforts by theGovernment to revise the outdated domestic oil and gas law, and introduce better incentives for upstream contractors, could go a long way toreigniting investor sentiment into Vietnam’s oil and gas, though contribution to future oil output growth could be limited, given the gas-heavynature of PetroVietnam’s current projects pipeline,” Fitch’sanalysts said, noting the result would see Vietnam’s self-sufficiency in crudeoil come to an end.
In fact, Vietnam’s crude oilimports expanded by more than three times in 2018 to 5.3 million tonnes, andlook poised to expand further over the coming years following the fullcommissioning of Nghi Son, the country’s second refinery and petrochemicalscomplex.
Meanwhile, crude oil exportsheaded in the other direction, declining by 41 percent on year, mirroring thedeclines in domestic production.
After running at an averageoperating rate of 103 percent last year, the Dung Quat oil refinery is expectedto continue to maintain elevated runs, both to meet strong domestic demand andto fend off competition from Nghi Son.
Fitch’s analysts also said theoutlook for refining capacity growth in Vietnam remained upbeat, although thiswould come at the cost of even greater dependence on crude oil imports goingforward.
They explained that following afinal investment decision in 2017, the long-delayed construction of the 200,000b/d Long Son refining and petrochemicals complex is finally underway,spearheaded by Thailand’s Siam Cement Group (SCG), the third stand-alonefacility marked down for start-up in 2023.
In addition, Dung Quat refineryoperator Binh Son Refining and Petrochemical Company (BSR) is also movingforward with steps to upgrade and expand its facility for 1.8 billion USD by2021, securing an environmental impact assessment from the Ministry of NaturalResources and Environment in March.
In light of a widening domesticcrude deficit, Vietnam unveiled plans to manage its oil import bill by maximisingexports of its low sulphur Bach Ho crude, which often fetches a strong premiumin the Asia crude market while substituting crude feedstock for own consumptionwith competitively priced US crude.
As for crude oil imports, Vietnamis just one of a growing number of countries in Asia that are opening theirdoors to more US crude inflows, both to capitalise on favourable US-Asiaarbitrage, but also to deepen energy ties and improve trade relations with theUS.
PetroVietnam received its first-evercargo of US crude in May, comprising of 950,000bbl (barrels) of US West TexasIntermediate (WTI). Experts said more imports could be on the cards, dependingon prices and the grade’s compatibility with the refinery.-VNS/VNA
VNA
