According to Oil & Gas Journal (OGJ), Vietnam held 600 million barrels of proven oil reserves as of January 2007, all of which are located offshore. Ongoing exploration activities are likely to increase this figure in the future, as Vietnam’s waters remain relatively underexplored. Vietnam’s oil production has increased steadily over the last two decades, although oil output declined in 2005 and 2006 after peaking above 400,000 barrels per day (bbl/d) in 2004. In 2006, Vietnam produced an estimated 362,000 bbl/d of oil. EIA forecasts that the country’s oil production will rise above 400,000 bbl/d again in 2008, based on new production projects that are expected to come online. In 2006, Vietnam consumed an estimated 276,000 bbl/d of oil, and EIA expects this figure to rise to about 332,000 bbl/d in 2008. Although it is a significant net oil exporter, Vietnam relies on imports of petroleum products due to a lack of refining capacity.

Vietnam’s oil sector is dominated by the state-owned Vietnam Oil & Gas Corporation (Petrovietnam). Petrovietnam is under the control of the Ministry of Industry, although in practice the national oil company (NOC) is also directed by the Politburo and other central government planning agencies. All oil production in the country is carried out by Petrovietnam itself, or through production sharing contracts (PSCs) or joint-ventures in which the national oil company has an equity stake. The largest oil-producing company in Vietnam is Vietsovpetro (VSP), which is a joint-venture between Petrovietnam and Zarubezhneft of Russia. Petrovietnam also has formed partnerships with other international oil companies (IOCs) and NOCs, including BP, ConocoPhillips, Korea National Oil Corporation (KNOC), Malaysia’s Petronas, Nippon Oil of Japan, and Talisman. Petrovietnam also controls Vietnam’s downstream oil sector through various subsidiaries, such as Petechim and Petrovietnam Oil Processing and Distribution Company. The Vietnamese government has begun to privatize the national oil company’s non-oil-related business units in 2006, although industry analysts expect that hydrocarbon activities will remain under state control.

Vietnam currently produces oil from nine offshore fields, the largest of which is the Bach Ho (White Tiger) field operated by Vietsovpetro. Vietnam also receives about 27,000 bbl/d of oil from the shared PM-3 Commercial Arrangement Area between Vietnam and Malaysia (see the Malaysia Country Analysis Brief for more information). Vietnam’s oil production has decreased over the last two years primarily as a result of declining output at Bach Ho, which accounts for about half of the country’s crude oil production. Several new projects are expected to come online in the next two years, which EIA expects will raise Vietnam’s oil output even as Bach Ho and other mature oil fields continue to decline.

One of the most active areas for ongoing exploration and production (E&P) activities in Vietnam is the offshore Cuu Long Basin (see map below). One of the most important new developments in this area will be the Su Tu Vang (Golden Lion) field, which field operator Cuu Long Joint Operating Company (CLJOC) expects to add 100,000 bbl/d of oil production in late 2007 or early 2008. The CLJOC consortium includes Petrovietnam (50 percent), ConocoPhillips (23.25 percent), KNOC (14.25 percent), SK Corp. (9 percent), and Geopetrol (3.5 percent). There are several other fields in the Cuu Long Basin that are expected to come onstream by 2008. The Phuong Dong field, which is being developed by the Japan Vietnam Petroleum Company (JVPC), is expected to start production in the third quarter of 2008 at a rate of 23,000 bbl/d. The Ca Ngu Vang field is expected to start producing 20,000 bbl/d plus associated natural gas in the second quarter of 2008. There are also extensive E&P activities ongoing in the Malay and Nam Con Son Basins.

Amendments to Vietnam’s Petroleum Law in 2000 paved the way for a more open and transparent licensing round scheme through which E&P projects would be offered to international investors. Continued exploration in offshore Vietnam is crucial to increasing oil production in the future, and Petrovietnam believes that the country holds substantial untapped hydrocarbon resources. Vietnam held its first licensing round during 2004-2005, although the endeavor did not receive significant attention from international oil companies (IOCs). Petrovietnam launched the second bidding round in April 2007 with improved terms for potential investors, hoping to lure IOCs to draw on their superior technical expertise. The 2007 round includes 7 blocks in the Song Hong Basin, which Petrovietnam claims hold oil and gas reserves of 5 billion barrels of oil equivalent in place.

Vietnam claims ownership of a portion of the potentially hydrocarbon rich Spratly Islands in the South China Sea, as do the Philippines, Malaysia, China, and Taiwan (see the South China Sea Fact Sheet for more information). In June 2007, BP abandoned plans to conduct exploration activities in Block 5-2 between Vietnam and the Spratly Islands, citing ongoing uncertainty over competing ownership claims between Vietnam and China. Vietnam and several of its neighbors have reached agreements in principle in the past to conduct joint exploration for oil and natural gas resources in the area, although continued territorial disagreements have hindered these efforts. Vietnam also claims the Paracel Islands in the South China Sea, which China first occupied in 1974.

According to data from the International Energy Agency (IEA), Vietnam exported about 125,000 bbl/d of crude oil to Australia, 40,000 bbl/d to the United States, and 30,000 bbl/d to Japan in 2006. Industry sources report that Vietnam also exports oil to regional refining centers in Singapore and Thailand, although this data is not reported in the IEA figures. Vietnam imports refined petroleum products since the country lacks refining capacity. Petrolimex, a unit of Petrovietnam, is the primary company charged with importing petroleum products, accounting for about 60 percent of the country’s imports. Petrolimex also operates 300 miles of petroleum product pipelines, although much of the country’s fuel supply is transported by road.

Vietnam is in the process of developing the country’s first refinery, the planned $2.5-billion, 140,000-bbl/d facility at Dung Quat. After several years of delays as a result of problems securing financing for the project, construction finally began in November 2005. One of the main reasons for hesitation by foreign investors was the planned Dung Quat location, which is more than 600 miles from the Bach Ho oil field and far from the population centers of Hanoi and Ho Chi Minh City. Petrovietnam plans to begin commercial operations at the Dung Quat facility in early 2009. A second refinery project is under consideration at Nghi Son in the north of the country, which would be located much closer to end-users but far from the country’s main oil-producing areas. The facility is planned to have a capacity of 150,000 bbl/d. Petrovietnam hopes to build the plant by 2010, although financing for the Nghi Son refinery has not been finalized. The government has also initiated a feasibility study for a possible third refinery to be located at Vung Ro in southern Vietnam, although no specific plans regarding the size and timeline of such a plant have been finalized.