May 1, 2000
Vietnam has suddenly become a hot place for international companies.

Vietnam action heating up

Conoco has acquired interest in Block 15-2 off Vietnam.
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Vietnam has suddenly become a hot place for international companies. In the past several months, new contracts have been signed with international firms and more are on the books.

  • In January, an unnamed US-firm signed a production-sharing contract with PetroVietnam for exploration of Blocks 102 and 106, a local paper reported.
  • In February, US-based Conoco acquired a 30% working interest through a farm-in on Block 15-2 in the shallow water Cuu Long Basin. Conoco acquired the interest from Japan Vietnam Petroleum, a group led by Nippon Mitsubishi Oil.

Block 15-2 is in production through the first phase and flowing some 35,000 b/d of oil from the Rong Dong Field. Development drilling for the second phase of the field's development is set to begin shortly. Additionally, Conoco also signed a Heads of Agreement with PetroVietnam and the Korean National Oil Company on Block 16-2, allowing the company to become the operator of the blocks.

While Conoco is gearing up for exploration, other foreign firms are setting up arrangements. A consortium consisting of BP Amoco, Statoil, and ONGC are finalizing a $1.5 billion gas deal with Vietnam for a pipeline. The two sides have been in negotiations for a deal calling for an integrated plan including gas productions, a 390-km pipeline, and a combined power and fertilizer plant for several years. The companies propose to extract the gas from the Lan Tay and Lan Do fields in Block 06-1.

The deal has made significant progress as of late when the consortium and Vietnam's Planning and Investment Ministry initialed a document covering a number of points agreed upon in recent talks. Several outstanding issues still exist and are presently in the hands of the Premier of the country to resolve. While neither side has discussed the issues with the press, it is known that the outside investors are seeking government guarantees on legal matters such as foreign exchange and taxes.

Another foreign interest working to get into the Vietnamese action is Russian oil major Rosneft. The company has said it wishes to join another Russian firm operating in Vietnam, Zarubezhneft, and Idemitsu of Japan in developing offshore Block 9.

The companies are in talks and have agreed to jointly finance the Vietnamese share of the development. However, discussions between the three companies and Vietnam have stalled, due to questions on how to distribute shares of an operating company, which would be established for the development. Zarubezhneft has proposed a 35% stake to PetroVietnam, a 50% stake to itself, and the remaining 15% to Idemitsu. PetroVietnam wants the opposite - 50% to PetroVietnam, 35% to Zarubezhneft, and 15% to Idemitsu. Talks are still underway.

India looking to second round

Just as India is concluding the first round of licenses under its New Exploration Licensing Policy (NELP), the government is already eyeing a second round and liberalizing the country to lure more investment. According to India's Minister of Petroleum and Natural Gas, the government has finalized its "Hydrocarbon Vision 2025" - a program initiated by the country's Prime Minister.

"Hydrocarbon Vision 2025" establishes a panel to help improve the country's petroleum industry. The group was tasked with identifying short term and long term measures for exploration, production, and transportation of hydrocarbons and create a plan to restructure government-owned companies in the industry.

In addition, the minister stated that a second round of blocks on offer for bidding will be announced soon. The new round will include deepwater blocks on the west coast of the country, near the giant Bombay High Field. The first round offered seven deepwater blocks off the country's east coast in the Krishna-Godavari basin, the site of a deepwater discovery last year.

Australia first to license technology for gas-to-liquids

Australia has become the first country to license Syntroleum's technology for converting natural gas into synthetic liquid fuels. The government signed a licensing agreement with the company valued at A$30 million for rights to use the gas-to-liquids (GTL) process with a reduced royalty structure for GTL synthetic fuels plants.

As part of the agreement, the government will give Syntroleum an up-front cash payment as an advance on future license fees. In addition, the government has approved a A$40 million, 25-year loan to the company to support further development and commercialization of GTL technology in Australia with local universities and other research institutions.

Syntroleum will construct a large-scale GTL plant in Australia based on second-generation GTL technology developed with Arco. This will result in the construction of a 10,000 b/d GTL plant that will process gas from fields on the Northwest Shelf.

The plant will cost upwards of US$400 million and will be located on Western Australia's Burrup Peninsula, about 2-1/2 miles from the Northwest Shelf Joint Venture LNG Plant.

German engineering firm INA TESSAG will design the plant. The Western Australian government has agreed to a A$30 million investment in infrastructure to support the plan, including roadways and a desalinization plant. Syntroleum will take a 50% interest in the production and will receive license fees on the remaining output. Enron and Methanex have also committed to taking minority stakes. Production is expected to begin in late 2002 or early 2003.

Pertamina's new head plans output boost

With the new government in place in Indonesia, President Abdurrahman Wahid is eager to clean up any remnants of the previous administration. His targets are all state-owned enterprises; topping his laundry list is Pertamina, the country's state oil company.

According to the local Jakarta Post, the government wants the company transformed from a "cash cow into a profit-oriented business entity." And the first way to do it was to install a new leader. After several months of searching, the government finally replaced Martiono Hadianto with Baihaki Hakim, former president of Caltex Pacific Indonesia.

Since taking office, Hakim has pledged to increase oil output from 70,000-100,000 b/d in the next 2-3 years by maximizing the capacity of its old wells. He said that oil production of the old wells could be boosted by 30-40% and new wells could pick up the remaining slack.

The government is urging the company to enter a transformation period until about 2004, in order to reorganize the company and become profit-oriented. But Hakim is not getting rave reviews on his new job. The new president suggested a new plan that companies operating in Indonesia and earning significant US $ revenues should pay for their oil in that currency. Hakim said this plan would make exporters more efficient in the global marketplace as it would more away from oil supply on a quota basis.

Many have argued that this would lead several exporters into bankruptcy. The arguers claim that companies will need time to implement such a plan and cannot move to direct competition right away. However, the plan was scheduled to go into effect last month.