Trying times for Vietnam's oil industry
Trying times for Vietnam's oil industry
By Adrian Edwards
THAI BINH (Reuter): A strange sight has appeared in the Red River rice plains of northern Vietnam in recent weeks.
Southeast of Hanoi, just onshore from the Gulf of Tonkin, a giant drill is suspended from a tower 100 ft (30 metres) above the soft alluvial soil.
For generations the earth on which it stands yielded little more than rice. But during the Vietnam War people noticed something strange.
"Some farmers were cooking food. They used gas that came out of the ground," said a Hanoi resident who had been in the area.
In the 1970s and 1980s Soviet-Vietnamese teams, eager to exploit this hidden wealth, worked to tap and harness the energy source but without significant success.
Today, however, using the benefits of new technology and new methods of seismic analysis, the foreigners are back.
Perth-based company Anzoil began in early March to drill the first well in northern Vietnam for more than ten years. Results are expected within weeks or months.
Success is not just a concern for Anzoil's shareholders. After a painful few months of reassessment Vietnam's oil industry, centered in offshore fields more than a thousand km (625 miles) south of here, badly needs a boost.
French oil firm Total SA last year pulled out of a high- profile $1.2 billion project to build Vietnam's first oil refinery after a decision was taken to locate it at a remote site on the central coast, far from both markets and oil supplies.
Initial enthusiasm among foreign companies seeking to replace the French giant was tempered by discontent over the carve-up of shares.
Meanwhile, Australia's Broken Hill Pty Ltd has been trying to renegotiate a A$700 million ($539 million) production-sharing contract in the Dai Hung offshore field where reserve estimates have been slashed from 800 million barrels to 100 million.
Results elsewhere have also been disappointing and within the industry there are rumors of more bad news to come.
"It's a wild-ass guess here. It always is," said a worker at the Anzoil site as the drilling began.
"A few years ago they were talking about this place (Vietnam) as the new great hope in Asia. But down south right now there's big names, some of whom are thinking of pulling out altogether."
Despite the griping the government has been standing firm. With a key communist party meeting just months away, Vietnam is in no mood to start bending to outside pressure.
"We don't need them," said Ho Si Thoan, head of state oil firm PetroVietnam, referring to foreign companies who complain.
"We invited companies to come to Vietnam to cooperate with Vietnam and if they consider that the project is profitable, is acceptable to them, they participate...If not they they don't participate."
For some of the foreign companies involved in Vietnam's oil and gas industry there's sympathy for that position.
"The problem is you've got people here who think they can come and dictate terms to the Vietnamese," said one Western executive. "Quite frankly one of the reasons for all these complaints is that some of the people here came to Vietnam without really doing their sums."
Nonetheless, Vietnam has tacitly accepted that the oil industry outlook may not be as bright as first thought.
Recent official statements have indicated a more modest view of prospects than previously. Though bright hopes remain for areas such as the 15-1 oil block off the southeast coast, officials increasingly talk about the outlook for gas.
Gas, however, also poses challenges. Unlike oil, which can be pumped into tankers and sent anywhere, costly pipelines must be built to carry gas and users are harder to find.
Expensive electric power or petrochemical plants must be financed and built before the gas can flow, adding to the development time, project costs and risks and the delay in payback.
"The government has plans to build several power plants in the area of Baria-Vung Tau (southern Vietnam) with a capacity of 2000-2,400 megawatts. So the demand for gas supply will be 300- 350 million cubic feet per day," said Thoan.
"Depending on reserves we will define in the near future we can think about gas exports and new energy plants."
But that's about as far as the thinking has changed. Despite the debacle with Total, Hanoi is already talking about a second refinery to be completed by 2002 and located even further north to help the poorer regional economy.
Officials like Thoan are optimistic that production target of 18-20 million tons of oil per year by 2000 can still be met. At the same time he envisages a gas industry in Vietnam's south providing spin-off benefits for related industries.
"For Vietnam I think..(the question of) south Vietnam, north Vietnam, central Vietnam is not so important," he said. "The most important problem for the government is how to develop properly the economy."