The rapid exhaustion of its main oil discoveries is putting the Viet Nam National Oil and Gas Group, better known as PetroVietnam, under great pressure to reach its oil exploration and production targets for 2018.
PetroVietnam produced 15.52 million tonnes of oil in 2017, surpassing its set target by 1.3 million tonnes. However, the country’s sole oil exporter has reduced its 2018 production target by one million tonnes, due to concerns over the depletion of natural oil resources.
Its general director, Nguyen Vu Truong Son, acknowledged that most of the oilfields have been exploited for many years and are in their final stages, with production declining by 15-30 per cent per year.
Bach Ho (White Tiger) field, the country’s largest and longest-producing oilfield, contributing about 60 per cent of the nation’s total oil production for PetroVietnam, is in a state of depletion and can only be explored in 4-5 years.
In addition, the rapid flooding, at over 60 per cent, in many fields due to intensive exploitation, such as Hai Su Trang (White Sea Lion), Te Giac Trang (White Rhino), Su Tu Vang (Yellow Lion) and Rang Dong (Dawn), is posing a challenge that may reduce oil production in the coming years, Son said.
According to Vietsovpetro’s general director, Tu Thanh Nghia, the largest problem facing the company is the sharp decline in output at its major oilfields, such as at Bach Ho and Rong (Dragon), while new discoveries, such as Gau Trang (White Bear) and Tho Trang (White Rabbit), are small fields with low reserves.
Therefore, the production plan of four million tonnes of oil per year remains a large challenge for the Russian-Vietnamese oil and gas exploration joint venture, Nghia said at PetroVietnam’s conference to set 2018 tasks.
Under-funded exploration
The year 2017 proved to be the most difficult year for PetroVietnam’s exploration activities, when oil reserves increased by only four million tonnes, which was much lower compared to the strategic target of 28-42 million tonnes per year.
In previous years, PetroVietnam often invested over US$2 billion to drill 30-40 oil wells and replenish its oil reserves by 35-40 million tonnes per year, but from 2015 onwards, investments from the group and its foreign partners have decreased by five times.
“It all started with exploration,” said Nguyen Quynh Lam, PetroVietnam’s deputy general director, who is in charge of exploration activity.
Lam said weak exploration would lead to oil shortages for other activities, including petrochemical refining, electricity and fertiliser production. He expected the Government would soon approve the group’s financial regulations, allowing it to extract money for the exploration fund.
While awaiting the Government’s approval, Lam said PetroVietnam would continue to call for foreign funds for developing some oil and gas fields, and would give up its executive role, in exchange for needed capital.
Ngo Huu Hai, PetroVietnam Exploration and Production Corp’s (PVEP) representative, said the company currently lacked at least $150 million for exploration activity in 2018. Its production target this year would also decrease by about one million tonnes of oil equivalent.
Hai said the company was implementing measures to improve the financial condition and rank projects to restructure its project portfolio, as well as break or relax investment agreements, along with reducing costs. — VNS