Vietnam

Gazprom Group’s foothold in Southeast Asia.

In accordance with Gazprom Group’s strategy for entering new international markets, Vietnam is one of the most promising Asia-Pacific countries for energy projects. Gazprom International, Gazprom’s single operator for hydrocarbon prospecting, exploration and development projects outside Russia, is currently engaged in developing oil and gas licensed blocks Nos. 112, 129–132, as well as Nos. 05–2 and 05–3 on the shelf of the South China Sea.

Participation in hydrocarbon prospecting, exploration and production across Vietnam holds a number of benefits for Gazprom Group, especially from an economic viewpoint. The technological benefits come from gaining further international experience, including in offshore operations.

In addition, Gazprom International and Gazprom Gazomotornoye Toplivo contribute to the development of Vietnam’s NGV market.

Gazprom’s exploratory drilling and seismic survey area in Vietnam (block No. 112 with expansion) and blocks Nos. 129–132, 05–2, and 05–3

Project structure

Licensed block No. 112 (with possibility of expansion to blocks Nos. 111/04 and 113). Bao Vang and Bao Den fields

Blocks Nos. 112, 111/4 and 113 with a total acreage of 17,300 square kilometers are located in the southwestern part of the Gulf of Tonkin, northwest of the South China Sea. The aggregate C3+D hydrocarbon reserves contained in the prospective structures are estimated at 767.8 million tons of fuel equivalent.

In 2000, Gazprom, PetroVietnam Oil and Gas Group, Gazprom International, and the hydrocarbon exploration and production company PetroVietnam Exploration & Production (PVEP) entered into a contract to develop oil and gas block No. 112. The document provides for hydrocarbon prospecting, exploration and marketing under the Production Sharing Agreement (PSA). The 25-year contract includes a 5-year renewal clause. To implement the project, PVEP and Gazprom International established the joint operating company Vietgazprom on equal terms in 2002. In 2005, following prospecting and exploration performed in 2003–2004, it was decided to include the neighboring block No. 113 in the contract.

Geological exploration in block No. 112

Geological exploration in block No. 112

In 2007, drilling of the third prospecting well in the blocks within the Bao Vang structure resulted in the discovery of the namesake gas and condensate field with two formations that proved to be productive (natural gas inflow was around 400,000 cubic meters per day). Since the boundaries of the field extended beyond licensed block No. 113, in 2008 the Vietnamese Government granted Vietgazprom permission to include block No. 111/04 in the contract. In 2009, drilling operations conducted in the Bao Den structure resulted in the discovery of commercial hydrocarbon reserves and another gas and condensate field with a daily gas inflow of about 300,000 cubic meters (Bao Den field).

Oil and gas blocks Nos. 129–132

Blocks Nos. 129–132 are located in the central part of the South China Sea and cover a total area of 28,400 square kilometers. Their initial hydrocarbon resources are estimated at 700 million tons of fuel equivalent. The projected recoverable reserves stand at about 460 million tons of fuel equivalent (including some 350 billion cubic meters of gas, 75 million tons of oil, and 35 million tons of gas condensate).

In 2008, Gazprom, PetroVietnam Oil and Gas Group, Gazprom International, and PVEP inked the contract to develop the blocks under the PSA, appointing Vietgazprom as the project operator. The 30-year contract includes a 5-year renewal clause. The document came into effect in 2009.

The combined first and second phases of prospecting and exploration will be completed in 2018. As of today, a petroleum gas field has been discovered within the Than Bien structure. In the course of exploration, Vietnam’s deepest offshore wells (around 4,000–5,000 meters deep, with the sea depth reaching 1,200–1,600 meters) have been drilled in blocks Nos. 131 and 130 within the Than Bien and Than Dat structures, respectively.

Blocks Nos. 05–2 and 05–3. Moc Tinh and Hai Thach fields

Licensed blocks Nos. 05–2 and 05–3 with a total area of 4,300 square kilometers are situated in the southeastern part of the South China Sea. The Moc Tinh (block No. 05–3) and Hai Thach (blocks Nos. 05–2 and 05–3) fields have been discovered in the area. The aggregate reserves of both fields are estimated at 55.8 billion cubic meters of natural gas and 20.9 million tons of gas condensate.

Bien Dong offshore stationary platform at Moc Tinh field

Bien Dong offshore stationary platform at Moc Tinh field

The development of these blocks under the PSA started in 1992. Project membership changed with time. In 2009, all participants except for PetroVietnam Oil and Gas Group withdrew from the project. To keep the project going, Bien Dong POC (a subsidiary of PetroVietnam Oil and Gas Group) was established. Gazprom Group joined the project in 2012 and became a party to the PSA with a 49 per cent stake (PetroVietnam Oil and Gas Group holding 51 per cent) in 2013. Gazprom International represents Russian interests in the project.

Commercial hydrocarbon production in the blocks commenced in October 2013. The extracted feedstock is supplied to consumers in the south of Vietnam via the Nam Con Son-1 gas pipeline.

Ceremonial start of commercial gas production offshore Vietnam

Ceremonial start of commercial gas production offshore Vietnam

Vietnam’s NGV market

As part of the project aimed at producing and marketing natural gas as a vehicle fuel in the Socialist Republic of Vietnam, the PVGAZPROM Natural Gas for Vehicles joint venture (PVGAZPROM NGV) was set up by Gazprom International (35.5 per cent), Gazprom Gazomotornoye Toplivo (35.5 per cent), and PetroVietnam Gas (29 per cent). The registration procedure was completed in October 2015.

Eight provinces in a key economic area of southern Vietnam were chosen as a starting point for the joint venture’s business. The company launched a pilot project focused on, among other things, generating sustainable demand for gas as a vehicle fuel.

To achieve that goal, it is planned to create a small-scale gas liquefaction complex with an annual capacity of up to 12,000 tons of LNG, as well as a gas filling network for LNG and CNG.

PVGAZPROM NGV will offer natural gas as a fuel for motor vehicles, primarily in public transport. In addition, the company intends to tap into the waterborne transportation segment.

Development

Gazprom Group established business relations with PetroVietnam Oil and Gas Group in 1997, when the companies inked the Protocol on Cooperation. The parties entered into the Agreement of Cooperation in 2006 and into the Agreement of Further Cooperation in 2008. The Agreement on Strategic Partnership of 2009 provided for joint oil and gas projects in Russia, Vietnam, and third countries, thereby intensifying this collaboration.

In 2010, in furtherance of the above agreements, the Gazpromviet joint venture (Gazprom – 51 per cent, PetroVietnam – 49 per cent) was registered in Russia. In 2012, the company was granted development licenses for the Russia-based Nagumanovskoye oil, gas and condensate field (Orenburg Region) and Severo-Purovsky block (Yamal-Nenets Autonomous Area). 2015 saw the signing of the Agreement on the major terms and conditions of developing the Nagumanovskoye and Severo-Purovskoye fields.

In 2012, the parties extended their cooperation further, entering into a five-year Agreement on personnel training and retraining. The Agreement allows Vietnamese professionals to take internships and traineeships in Russia and beyond, including at Gazprom International’s facilities.

In May 2016, Gazprom and PetroVietnam signed a package of documents to advance their joined efforts: the Memorandum of Understanding on the development of new oil and gas projects, the Memorandum of Understanding on power generation, and the Addendum to extend the Cooperation Agreement on personnel training. The documents provide for, among other things, new oil and gas projects in Vietnam and other countries, joint gas-fired power generation projects in Vietnam, and a 5-year extension of the Cooperation Agreement on personnel training.

Nguyen Quoc Khanh and Alexey Miller. Photo by RIA Novosti. May 16, 2016

Nguyen Quoc Khanh and Alexey Miller. Photo by RIA Novosti. May 16, 2016