Fields and discoveries offshore Vietnam.
Honeymoon with oil industry is over as some pull out
Among the latter-day faint-hearted, Shell ceded Nam Con Son Basin block 10 following four fruitless exploration wells. Nearby, British Gas, Lasmo and apparently Total have also exited as operators, despite modest gas flows from their campaigns. Amoco has closed its Hanoi office, and now Occidental is pulling out of block 04-3 following drilling difficulties: some of its commitment wells did not even meet their objectives.
MJC's, in block 05-1, did, with last year's wildcat testing three oil and gas zones on the Thanh Long prospect. But the well took eight months and $45 million to drill, due to a typhoon and pressure-induced stuck drillpipe. Next step announced by the Mobil-led consortium is a shallow well on Thanh Long. "To my mind," says Gavin Law of UK analysts Wood Mackenzie, "that smells of `drill and meet commitments quickly, then leave'."
Wood Mackenzie estimates that average costs for a dry hole off Vietnam are $12 million. Over the past few years, Vietnamese exploration wells have also averaged around 87 drilling days, higher than all other neighboring offshore sectors.
Before the recent withdrawals, Wood Mackenzie forecast 60 wildcat and appraisal well spuds between 1996-98 around Vietnam, mainly in the Cuu Long and South Con Son basins. That number may hold up, because offshore licences are still being signed - suggesting that Vietnamese PSC terms are not as harsh as sometimes depicted. In fact, says Law, flexibility over production splits has increased, with all taxation elements negotiable.
Among the latest awards, the Conoco/Pedco/Yukong Oil combo has unofficially won golden block 15.1, which may be on trend with JVPC's oil discoveries in 15.2. For an unknown reason, they were also asked to bring onboard Geopetrol, best known for its onshore production interests in Bolivia and France.
If this PSC is confirmed, it could be construed as Conoco's reward for signing up blocks 133 and 134 a year ago in the South Con Son Basin. Apart from overlapping acreage awarded by China to Crestone Energy, the significance of these blocks was dubious - and a work program for them has yet to be broadcast.
The other key recent entrants to Vietnam were Unocal/Mitsui Oil/Repsol in Malay Basin Block B. This is the only Vietnamese license with gas terms, and Unocal is a key gas practitioner in Thailand and Indonesia. Unocal's entry raised the rumors that Vietnam's gas could be partly channeled for export through nearby trunklines.
Block B lies north of Block 46, where Fina recorded two oil and gas discoveries last year. The question for Fina is whether quantities are large enough to warrant a commercial development, or whether to sell to an emerging player in these Joint Development Area waters (IPC?).
As with other gas finds off Vietnam - the latest came from Canadian Petroleum and Pedco in the South Con Son Basin - the development scope is unclear. The Lan Tay and Lan Do fields will form the basis for the new Nam Con Son pipeline to Vung Tau province; but owners of other gasfields along the route remain cautious. They need guarantees of new commercial and industrial markets onshore which the cash-strapped government cannot yet provide.
More revenue will come in once the new offshore oil developments are onstream, but even here there is uncertainty. JVPC's Rong Dong was declared commercial last July, and could be produced long-term through fixed processing platforms exporting to an FSU.
In the short term, however, an early production system (EPS) has been approved: this should come onstream next summer through a wellhead jacket offloading to an FPSO via a CALM buoy. Despite intensive appraisal of Rang Dong, the basement rocks are not performing as expected, hampering meaningful recovery estimates. A year's production at around 45,000 b/d will hopefully clarify matters.
Petronas Carigali will also produce first oil from the Ruby Field in block 01 next year, again through an EPS, following downgrading of recoverable oil from 130 to 80MM bbl. The initial scheme, based around a minimal facilities platform linked to an FPSO via a single-point mooring, is costed at $65 million. Prior to first oil, Petronas should assume control of the ailing Dai Hung project: BHP has yet to ratify the sale of its controlling interest, or the Dai Hung I floating production facility which it owns and operates. Oil estimates from the field proved wildly over-hyped, and production has recently slumped.
Vietnam's chief offshore asset remains the Bach Ho Field, which generated over 50MM bbl last year. Although a new associated discovery was reported last June, the field's lifespan remains unknown, says Gavin Law, as it produces from the basement: "It could just suddenly go belly-up."