PetroVietnam to cut energy imports with $1bn gas pipeline

PetroVietnam Gas has signed a milestone $1bn business co-operation contract with Chevron of the US, Japan’s Mitsui and Thailand’s PTT to build and operate a pipeline running from the gas fields off Vietnam’s southern coast to the Mekong Delta.

The project will help Vietnam in its efforts to reduce its dependence on energy imports.

Vietnam has been working hard to exploit its reserves of oil and gas and is now the third-largest hydrocarbon producer in south-east Asia.

However, until recently it had little capacity to process the raw oil and gas, which was mostly sold abroad for refining and then reimported.

The completion last year of the country’s first refinery, at Dung Quat on the central coast, has gone some way to restoring the balance.

However, Vietnam’s attempts to prospect further afield have run into trouble with China. Vietnam and China have competing territorial claims over the potentially hydrocarbon-rich seabed around the Paracel and Spratly Islands in the South China Sea.

Both BP and ExxonMobil have been warned off by China from exploring the waters close to the disputed area.

The PetroVietnam pipeline, which will have a capacity of 18.3m cubic metres per day, will supply industrial projects in the southern province of Ca Mau.

PetroVietnam Gas, a subsidiary of state-owned PetroVietnam, has taken a 51 per cent interest in the project, with Chevron holding 28.7 per cent.

Chevron is also the operator of the Block B gas fields in the Gulf of Thailand where the pipeline will originate.

The development is still in its early stages and, according to a recent filing with the Securities and Exchange Commission in New York, Chevron intends to make a final investment decision on the field in 2011.

The pipeline is a milestone in what has been a troubled passage for the exploitation of the Block B field, which is close to the Thai border.

The concession was originally granted to Unocal in the 1990s and passed to Chevron when it bought the company in 2005.

The cost of developing the project has been a major sticking point. The Block B field is heavily fractured and the gas will be expensive to produce.

Observers say that although Vietnam was attracted by the relatively low-cost option of coal to meet much of its energy needs, it has come to the conclusion that it will be hard to compete against Chinese, Korean and Japanese demand for Australian and Indonesian coal production, and is now proving more flexible on gas prices. (Financial Times)

Tags: PetroVietnam, Vietnam oil and gas, Vietnam oil and gas sector, vietnam oil gas