|Oil rigs on the Bạch Hổ oil field. Việt Nam's crude oil production is forecast to continue to drop over the coming years. — VNA/VNS Photo|
HÀ NỘI — Việt Nam’s self-sufficiency for crude oil could come to an end due to exploitation that could turn the country into a net importer of crude oil for the first time, experts warned.
According to analysts from the Fitch Solutions Macro Research, crude oil production in Việt Nam would continue to drop over the coming years, averaging annual declines of 4-5 per cent over the next 10 years, as offshore reserves fell and investment in significant new projects slowed.
Data from the General Statistics Oﬃce showed the country produced some 247,000 barrels per day (b/d) last year, a decrease of nearly 12 per cent on year, some way short of State-owned oil and gas company PetroVietnam's target of 14.2 million tonnes, equivalent to 285,000b/d.
PetroVietnam has also maintained a pessimistic outlook towards the sector, forecasting in late-2018 its crude oil production to decline by as much as 10 per cent annually to 2025, as output declines from some of its most mature domestic ﬁelds, namely Bạch Hổ - Việt Nam's largest oilﬁeld and responsible for 60 per cent of total production.
According to experts, the start of the Cá Tầm oil ﬁeld, a satellite development for the aging Bạch Hổ, in February could see a modest uptick in near-term output as it ramps up to peak output of 23,000 b/d, although it would still be insuﬃcient to stem the broader structural decline.
“Nascent efforts by the Government to revise the outdated domestic oil and gas law, and introduce better incentives for upstream contractors, could go a long way to reigniting investor sentiment into Việt Nam’s oil and gas, though contribution to future oil output growth could be limited, given the gas-heavy nature of PetroVietnam’s current projects pipeline,” Fitch’s analysts said, noting the result would see Việt Nam’s self-sufficiency in crude oil come to an end.
In fact, Việt Nam’s crude oil imports expanded by more than three times in 2018 to 5.3 million tonnes, and look poised to expand further over the coming years following the full commissioning of Nghi Sơn, the country’s second reﬁnery and petrochemicals complex.
Meanwhile, crude oil exports headed in the other direction, declining by 41 per cent on year, mirroring the declines in domestic production.
After running at an average operating rate of 103 per cent last year, the Dung Quấtt oil reﬁnery is expected to continue to maintain elevated runs, both to meet strong domestic demand and to fend off competition from Nghi Sơn.
Fitch’s analysts also said the outlook for reﬁning capacity growth in Việt Nam remained upbeat, although this would come at the cost of even greater dependence on crude oil imports going forward.
They explained that following a ﬁnal investment decision in 2017, the long-delayed construction of the 200,000 b/d Long Sơn reﬁning and petrochemicals complex is ﬁnally underway, spearheaded by Thailand’s Siam Cement Group (SCG), the third stand-alone facility marked down for start-up in 2023.
In addition, Dung Quất reﬁnery operator Bình Sơn Refining and Petrochemical Company (BSR) is also moving forward with steps to upgrade and expand its facility for US$1.8 billion by 2021, securing an environmental impact assessment from the Ministry of Natural Resources and Environment in March.
In light of a widening domestic crude deficit, Việt Nam unveiled plans to manage its oil import bill by maximising exports of its low sulphur Bạch Hổ crude, which often fetches a strong premium in the Asia crude market while substituting crude feedstock for own consumption with competitively priced US crude.
As for crude oil imports, Việt Nam is just one of a growing number of countries in Asia that are opening their doors to more US crude inflows, both to capitalise on favourable US-Asia arbitrage, but also to deepen energy ties and improve trade relations with the US.
PetroVietnam received its ﬁrst-ever cargo of US crude in May, comprising of 950,000bbl (barrels) of US West Texas Intermediate (WTI). Experts said more imports could be on the cards, depending on prices and the grade’s compatibility with the reﬁnery. — VNS