Workers on an oil rig.

Reduction in oil and gas exploration and exploitation 

Most active oil wells in Vietnam have been exploited since the 1986-2015 period. Major wells have been exploited for 15-35 years and are running out, resulting in a reduction in output of15-25% per year.

Domestic oil production fell from 16.9 million tonnes in 2015 to 15.2 million tonnes in 2016, 13.4 million tonnes in 2017, 12 million tonnes in 2018, 11 million tonnes in 2019 and 9.7 million tonnes in 2020. This trend is predicted to continue in following years.

To solve the problem, oil and gas producers, including the Vietnam Oil and Gas Group (Petrovietnam), add infilling wells every year. But the number of these wells remains modest and they have contributed only less than 10% of the total output of the whole field. Efforts to optimise the exploitation of wells have only helped increase output of the field by 1-2%. 

An offshore oil platform. (Photo: Vuong Thai)

Along with a reduction in oil production, Petrovietnam’s gas exploitation plans for the coming years are expected to shrink due to poor sales of gas, especially the falling demand of gas serving electricity production.

In the first nine months of this year, sales of gas for power generation were equivalent to only 72% of the firm’s figure in the same period last year and 70% of its plan. Compared to the plan assigned by the Ministry of Industry and Trade, the figure only reached 84% in the southeast region and about 70% in the southwest region. The drop has affected exploitation plans for the entire field.

For many reasons, the falling output and dwindling exploitation plans is obvious despite the careful calculation of oil and gas firms.

Measures sought to maintain, improve production

In order to complete all oil and gas exploration and exploitation targets in the 2020-2025 period, Petrovietnam has rolled out a number of comprehensive measures with the operations of new wells defined as the key solution. 

Due to various risks in searching and exploring new wells, the chance of success in an explored well is only 20%. At the same time, difficulties in administrative procedures for oil and gas exploration projects have hindered State-run firms and those with State capital such as Petrovietnam and PVEP to launch the projects. 

Vu Quang Nam, former Deputy General Director of Petrovietnam and Vice Chairman of the Petroleum Club said that the capital demand of oil and gas production is huge. It takes about 10-15 million USD to find and explore a normal well, not to mention risks during the process, he noted.

Nam stressed the need for capital resources and favorable mechanisms to facilitate the operations of oil and gas businesses, especially in securing capital for re-investment.

Employees on a Vietsovpetro oil rig.

According to the Vietnam Oil and Gas Association, due to the shortage in capital for exploration activities, production is failing to meet the demand for oil and gas reserve. At the same time, shrinking search, exploration and exploitation activities, coupled with the rising cost for exploration and exploitation operations and complicated security developments in the East Sea, will potentially discourage foreign investors. It is crucial to seek more incentives to draw more investment in this sector.

Experts also emphasized the need to apply short-term and medium-term measures to increase oil and gas reserve, including adjusting conditions on sharing profits between the State and investors, giving Petrovietnam greater authority to make technical changes to oil field development plans approved by the Prime Minister, and ensuring gas consumption by Vietnam Electricity.

Petrovietnam General Director Le Manh Hung said that the group has given top priority to exploration and exploitation. As Vietnam boasts huge oil and gas reserves, search, exploration and exploitation activities should be promoted to attract investors, optimise the sector’s contributions to national economic development and sovereignty protection, and create new sources of income for the country, he stated.