Shell plans to expand Vietnam business

Royal Dutch Shell is keen to expand its upstream and downstream business in Vietnam

Royal Dutch Shell is keen to expand its upstream and downstream business in Vietnam at a time when other oil majors such as BP and ConocoPhillips have been pulling out amid frustrations over bureaucracy and concern about the worsening territorial dispute in the South China Sea.

Thanh Le, Shell’s general manager in Vietnam, told the Financial Times that, outside of China and India, Vietnam was one of the most attractive markets in Asia, with energy demand set to grow strongly as the country’s economic transformation continues.

“With a young and growing population of 88m, we see potential for the future and believe Shell can add a lot of value in Vietnam,” he said.

Mr Thanh revealed Shell was eyeing a number of opportunities, including helping Vietnam build its first liquefied natural gas terminal and potentially bidding for new oil exploration licences.

The Anglo-Dutch company hopes to sign a memorandum of understanding with the Vietnamese government in the coming months, which would lay out the framework for closer co-operation in areas such as LNG, he said.

Mr Thanh added that Shell had been in talks about acquiring a 25-30 per cent stake in Petec, a fuel importer and distributor controlled by state-owned PetroVietnam, until the government finally decided in July that it did not want to open such a strategic sector to foreign investors.

He said he was “disappointed” by the decision as the acquisition would have given Shell a foothold in Vietnam’s fast-growing fuel retail business.

Most Vietnamese fuel distributors have been losing money in the past few years because the government has the kept pump prices down in order to win public support. Mr Thanh said this pattern was likely to continue in the next few years but that, over the next 10-15 years, the country would eventually move to market pricing.

Well over a decade after Shell ended its last drilling programme in Vietnam, with hundreds of millions spent in the mid 1990s and no commercial discoveries, the company is also considering bidding for new offshore exploration licences that have been put out to tender by PetroVietnam.

“We haven’t found the right opportunities yet but our technical team is still working on it,” Mr Thanh said.

Vietnam has 4.4bn barrels of proven oil reserves, a similar level to that of Australia, Egypt and Indonesia, and last year produced 370,000 barrels a day, equivalent to 0.5 per cent of global market share, according to BP statistics.

Rivals BP and ConocoPhillips both decided to sell their upstream assets in Vietnam in the past year as part of their global divestment programmes.

Foreign oil executives say Vietnam is a difficult place to invest because of the endemic bureaucracy and slow decision-making process at PetroVietnam and the worsening territorial dispute between China, Vietnam, the Philippines and other nations over the resource-rich South China Sea. Mr Thanh said Shell was monitoring the situation in the South China Sea “very carefully”.

Source Financial Times

Tags: Shell Vietnam