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Vietnam says BP Amoco deal to be done this year

HANOI - A Vietnamese minister said on Thursday a long-negotiated integrated gas project involving a consortium led by BP Amoco Plc would be signed this year, bringing in $1 billion of foreign investment. Planning and Investment Minister Tran Xuan Gia told a business seminar in Hanoi the government had just signed a decision related to the project's Lan Tay and Lan Do gas fields off southern Vietnam, worth about $500 million.

"And in the next few days, we will license the business cooperation contract for the pipeline taking gas from Lan Tay and Lan Do fields in Nam Con Son gas basin to the shore, which is worth about another $500 million," he said. Gia said the government had not rushed to grant licences for projects related to the gas fields and pipeline, because at the same time it had been considering contractors, equipment and pipeline facilities. "We are working hard on these," he said. "Therefore in the coming time, we will sign not just the licences, but also various contracts related to selling and buying gas etcetera, and we will have a solemn signing ceremony for all of these contracts. Asked by Reuters if that ceremony would be held this year, he replied: "Yes, this year."

Too early to fix date

He said it was still too early to fix a date as it still had to be negotiated with high ranking officials who would take part from Vietnam, Britain, Norway and India. Gia added that the project would bring total foreign investment approved in Vietnam for the year to $2 billion. Negotiations on the project, worth a total of $1.5 billion, have dragged on for years. The consortium, which includes Norway's Statoil and India's ONGC Videsh Ltd , expressed hope earlier this month it could be finalised by the end of this month. A consortium official said Gia's comments were nevertheless reassuring, saying: "That's exactly the kind of public statement that encourages us that we're on track." BP's chief representatives in Vietnam, Ian Sutherland, said the consortium hoped to be able to be able to move from the commercial phase to the full development phase this year. "That's certainly what both sides are targeting and it's fair to say both sides are confident that will happen."

However the foreign firms still want an agreement on a third power plan to take the gas. One plant has already been completed and another is under construction. The government has been torn over the third, which would either be constructed by Electricity of Vietnam and Electricite de France 1/8EDF.UL 3/8, by BP and Statoil, or by the state. "What we have at the monment is two-thirds of our customer base -- two power plants we know will be built and operational when the first gas flows," the consortium official said. "We need that final piece of the jigsaw in place to make this a totally commercially viable project, the focus is therefore to commit to this third power plant." Each element of the project -- mid-stream, upstream and downstream -- is worth about $500 million and BP and Statoil have already committed about $600 million between them.

BP has a 26.67 percent stake, Statoil 13.33 percent, ONGC 45 percent and state-run Petrovietnam 15 percent. The consortium estimates Nam Con Son has reserves of 59 billion cubic metres, which would be commercially viable for 20-25 years. The peak pumping rate envisaged is 2.7 billion cubic metres a year. Industry sources say a decision on the third power plant needs to be taken soon if the plant and pipeline building schedule is to be kept and gas is to flow by 2002. Analysts say finalisation of the whole project would be a big boost to foreign investor confidence in Vietnam, which has been hammered by the sort of haggling seen over Nam Con Son.

By David Brunnstrom - Reuters - October 26, 2000.