The Bạch Hổ oil field. Petrovietnam has proposed the restoration of a risk fund for oil and gas exploration. — VNA/VNS Photo Huy Hùng

HÀ NỘI — Vietnam National Industry-Energy Group (Petrovietnam) has proposed restoring a risk fund for oil and gas exploration to help secure long-term energy supplies and finance investment in energy, as the country's mature oil fields decline and exploration becomes increasingly costly and uncertain.

The proposal was put forward by the State-owned energy firm during recent discussions on amendments to the Law on Petroleum.

Petrovietnam Chairman Lê Ngọc Sơn said that a dedicated exploration risk fund would provide a stable financial mechanism for geological surveys, exploration drilling and reserve appraisal while supporting investment in new energy technologies.

Exploration is the starting point of the oil and gas value chain but also its riskiest stage, requiring companies to spend tens or even hundreds of millions of US dollars on drilling programmes that may not result in commercially viable discoveries.

It requires enterprises to commit large amounts of capital years before determining whether a resource can be developed profitably. This often creates a mismatch between long-term investment cycles and annual financial planning, making exploration budgets vulnerable when oil prices fall or cash flow tightens.

The proposal comes as many of Việt Nam's largest oil fields, including Bạch Hổ, Rồng and Đại Hùng, have been producing for decades and are experiencing natural output declines. New discoveries are increasingly concentrated in smaller, marginal or deep-water fields that require larger investments, more advanced technologies and longer payback periods.

The fund would be financed from a portion of Petrovietnam's after-tax profits rather than the State budget to allow the group to finance exploration.

According to Phan Ngọc Trung from the Vietnam Petroleum Association, similar mechanisms are widely used by national and international oil companies around the world, although they may not operate under the same legal structure as the one proposed in Việt Nam.

Exploration spending should be recognised as a necessary operating cost, he said.

The proposed fund could also support Petrovietnam's transition into a broader energy group as the country is expanding into offshore wind power, hydrogen, liquefied natural gas, carbon capture and storage, and other emerging energy industries.

Nguyễn Hữu Lương from the Vietnam Petroleum Institute said the revised Petroleum Law should introduce more flexible investment incentives and risk-sharing mechanisms to encourage exploration, particularly those in deep-water and offshore areas.

Petrovietnam had previously maintained an exploration risk fund in line with international practice by setting aside part of its stable operating capital. The fund was designed to absorb losses from unsuccessful exploration that did not lead to commercially viable discoveries or progress to the development and production stage.

However, the mechanism was discontinued after the 2014 Law on Management and Use of State Capital Invested in Production and Business at Enterprises took effect, which did not allow State-owned enterprises to establish such special-purpose funds. — VNS