23 November 2011

 BMI View: Russian players TNK-BP and Lukoil are likely to be in the running for new offshore acreage in Vietnam after they signalled their long-term commitment to the country. New exploration will be critical to slowing a decline in Vietnamese output, which we see entering structural decline from 2015.

TNK Vietnam, a subsidiary of TNK-BP, has said that it will bid for blocks in Vietnam's offshore licensing round, according to an executive quoted by Reuters. Chris Einchcomb, Vice President of International Projects for TNK-BP, said that the company was 'seeking new opportunities to deepen our presence in the country'.

Pastures New

 

In August 2011, national oil company PetroVietnam opened the bidding for nine offshore oil and gas blocks (43, 03, 10/11, 41, 11-2/11, 05-3/11, 50, 22/03 and 12/11) in the Nam Con Son, Phu Quoc and Malay-Thochu basins. Bidding will close on December 9 and PetroVietnam is due to announce the winners on January 5 2012.

The round is Vietnam's first since 2007, as the country looks to boost production in order to meet rising demand and offset declining output from the country's flagship Bach Ho field. Our forecasts point to peak production of 407,500 barrels per day (b/d) in 2015, after which volumes are set to decline, with just 332,000b/d expected in 2020. Officials will be hoping that new investment in offshore exploration will follow the current licensing round, slowing or possibly even reversing the long-term decline in output.

Russian Interest

TNK-Vietnam has already announced that it will drill two sub-sea wells on the Lan Do field in December and plans to bring first gas onstream in Q412. It is targeting 2bcm per annum and is one of a number of Russian oil and gas firms reportedly seeking to expand its presence in Vietnam. A senior PetroVietnam official said last month thatGazpromZarubezhneft and Lukoil were probable bidders. Lukoil is perhaps the most likely to make an offer after it acquired a 50% holding in the Hanoi Trough 02 block offshore Haiphong from Quad Energy. Aleksander Nekhaev, director of Lukoil Overseas Vietnam, said that the block contained 12 locations that could hold promising oil deposits and added that the company will drill three appraisal wells over the next few months. We expect more exploration to be announced next year once the winners of new licences are known.