Vietnam oil promises now a dim memory
HANOI- When
Prime Minister Phan Van Khai
promised disgruntled foreign oil
executives last July that Vietnam
would create a new climate for
energy sector investment, a wave of
relief swept through the room.
Khai said the Ministry of Planning
and Investment, state oil monopoly
Petrovietnam and the customs
department would work out solutions
to a perceived myriad of woes.
But, almost a year later, little has
changed.
``The general mood is gloomy...a
sort of resignation among firms that
they hope the things to come will be
better,'' said one oil executive.
Last year communist-ruled Vietnam,
a minor world producer, pumped
12.6 million tonnes of crude and set
a 1999 production target of 14.5
million tonnes.
In 1998 it introduced a new
exploration vehicle -- Joint Operating
Companies (JOCs) -- to replace
existing strict Production Sharing
Contracts (PSCs) in some areas.
Once reserves were ascertained it
was hoped JOCs would be
converted into production joint
ventures between Petrovietnam and
foreign investors. It was reasoned
JOCs would help Petrovietnam
become a major player through their
extra hands-on experience.
One deal has been signed with a
group led by U.S. firm Conoco, but
the overall industry response to
JOCs has been lukewarm, with most
majors favouring PSCs rather than
having to cope with the added
burdens of forming separate entities.
COMPLAINTS STILL RIFE
Hanoi insists it is striving to make life
easier for all foreign investors in the
country.
But oil firms still complain about
arcane bureaucracy, restrictive
policies and rules, a punishing fiscal
regime and the prospect of
diminishing returns.
Add to this that Vietnam has so far
failed to live up to its promise of
significant easily recoverable oil
reserves together with low
international oil prices, and the trend
has been for exit strategies rather
than investment plans.
``I think people are disenchanted but
I think that is reflected in the industry
as a whole,'' said lawyer Michael
Polkinghorne, the Bangkok-based
Coudert Brothers partner
responsible for Indochina.
``It's just that when the industry is
going through a hard time, those
countries where things have been
considered rather difficult have
tended to suffer.''
FOREIGN COMPANIES EXIT
In the past few years The Broken
Hill Proprietary Co Ltd, British Gas
(BG Plc), LASMO Plc, Occidental
Petroleum Corp, Texaco Inc and
Total SA have left.
Others have looked to sell PSC
stakes or withdrawn from
negotiations with Petrovietnam.
Malaysia's Petroliam Nasional Bhd
(Petronas) recently exited the
ill-fated Dai Hung field, to be
replaced by Vietsovpetro, an
18-year-old joint venture between
Hanoi and Moscow. The Malaysian
firm still operates the Ruby Field,
believed to be profitable.
Exxon Corp will shut its Vietnam
upstream operations in August.
``(Vietnam) has significantly failed to
live up to potential similar to other
East Asian countries which were
hyped up in the late 1980s and which
led to a stampede of oil companies,''
said Ian Cross, Asia-Pacific director
for IHS Energy Group.
As Vietnam opened to foreign
investment in the late 1980s, oil firms
charged in looking to secure a slice
of the promise hinted at by finds
registered by U.S.-based Mobil
shortly before the end of the Vietnam
War in 1975.
``The number of licences issued from
1988 to 1992 boomed, but have
since declined, and drilling activity is
now at its lowest levels for many
years,'' an oil executive said.
In the past decade Petrovietnam has
signed around 34 PSCs with 50
firms. Petrovietnam has yet to
respond to requests for details on
operating deals, but it is believed the
figure is less than 15.
VIEWS ON FUTURE VARY
An industry analyst with U.K.-based
Wood Mackenzie said Vietnam
needed to relax its strict fiscal
regime.
``In the current climate, where
nobody's really sure which way the
oil price is going, there probably
won't be many companies willing to
take the risk of actually investing in
(Vietnam),'' he said.
But Polkinghorne said as firms left,
fresh opportunities were created for
those that stayed behind.
``Many of the problems are more
apparent than real,'' he said. ``I have
noted the tenacity of some oil
companies who I would have thought
would have walked away a long time
ago but who have stuck around.''
Reuters - May 27, 1999.
|
|