Vietnam's oil bonanza, the dream and reality
Vietnam's oil bonanza, the dream and reality
By Philippe Agret
HANOI (AFP): After getting high on the hopes of striking black gold off the shores of Vietnam, the world's oil giants have now glumly awoke to the hazards -- the immense cost of investment and, so far, the meager rewards.
The mood was subdued among foreign companies exhibiting their technological wares last week at the second International Oil and Gas Fair in Hanoi.
"The results aren't bad, but they are not as great as some had hoped," said Melchior de Matharel, head of Southeast Asia operations with the French firm Total.
If caution is now the watchword, disappointed foreign petroleum companies may draw comfort from the recent "encouraging" discoveries of oil made by Mitsubishi Oil and the Malaysian firm Petronas Carigali, and of gas made by British Petroleum (BP), off the coast of southern Vietnam.
"Oil exploration is plainly hazardous. But the good news is that the Vietnamese basin is oil-bearing," Matheral said.
Prospectors' enthusiasm was abruptly dampened last May, when BHP Petroleum of Australia announced that reserves at the Dai Hung ("Great Bear") site, 375 kilometers (235 miles) southeast of Ho Chi Minh City, were far smaller than projected.
BHP initially estimated the site to contain 700 million to 800 million barrels of oil, but has now downgraded it to 100 million to 200 million. Production is scheduled to begin next month, at a modest level of 25,000 barrels per day.
That was a tough blow for BHP. It has already invested 240 million dollars in Vietnam -- and half of it went into the first phase of the Dai Hung project.
BHP headed an international consortium, selected in April 1993, to develop the field at a total cost estimated at US$ 1.5 billion. BHP holds 43.75 percent of the consortium, with Petronas holding 20 percent, and state-owned PetroVietnam 15 percent. The remaining 21.25-percent share is equally split between Total and the Japanese firm Sumitomo.
For the moment, it is the Japanese -- the main buyers of Vietnam's crude oil -- who appear to have had the best luck.
The Japan Vietnam Petroleum Co. (JVPC), a branch of the Mitsubishi Oil group, announced in June a "very promising" discovery at the Rang Dong ("Dawn") site.
According to the results of an exploratory well, the field may be "of the same caliber" as neighboring Bach Ho ("White Tiger"), the only site now being commercially exploited in Vietnam. Bach Ho's reserves are estimated at a maximum of 300 million barrels.
But it will take at least another year and further drilling to precisely determine the scope of the Japanese discovery, industry experts in Hanoi cautioned.
Pessimists say it will take four to five years in all to gauge Vietnam's oil potential fully.
Gas exploration and exploitation have also proven to be a risk business, although fortune has so far smiled on British Petroleum, which announced in September the discovery of two gas pockets, estimated to be 57 billion cubic metres (1,995 billion cubic feet), in Nam Con Son, south of Ho Chi Minh City.
BP and the Norwegian national company, Statoil, bought shares in the offshore concession, held by the Indian state firm Oil and Natural Gas Co. (ONGC), in 1992.
The consortium, with ONGC holding 55 percent, BP 30 percent and Statoil five percent, has conducted exploration and tests under a shared-production contract with PetroVietnam, which in turn has taken a five-percent stake on the interests of each of the European partners.
The high risks of exploration in Vietnam are not limited to lost investments. The South China Sea has been the center of Sino-Vietnamese rivalries for over a decade, a conflict that has been exacerbated by the whiff of oil in the region.
Chinese and Vietnamese ships exchanged fire in a contested area in 1988, and Beijing and Hanoi have since granted concessions to foreign oil firms on overlapping sites.