Vietnam - Commentary and company landscape

For Vietnam, I will cover the issues and company landscape in a single article. A number of the legacy issues and changes covered in my article from 12 months ago: https://www.dhirubhai.net/pulse/2023-ma-opportunities-southeast-asia-part-5-vietnam-robert-chambers.

Main 2023 updates

For the majority of 2023, it looked like this was going to be a short article, with the holding pattern rolling over from 2022. However, towards the end of the year there were some important updates I wanted to highlight:

• 1st LNG import terminal commissioned: Vietnam became an LNG importer in 2023, with the Thi Vai LNG Terminal inaugurated in October 2023. The terminal has an initial capacity of 1 mtpa, with a second phase planned to increase the capacity to 3 mtpa from 2027. Whilst this will help displace coal from an emissions perspective, it will not help Vietnam's balance of trade.
• Murphy Oil take FID on Lac Da Vang development: in November 2023, Murphy Oil announced that they had taken FID on their Lac Da Vang oil field development in Block 15-1/05. Murphy hold 40% and are operator, with their partners being PVEP (35%), and SK Earthon (25%). The phased development plan is based on a production platform and a leased FSO, with first production expected in 2026. It targets 100 MMboe of estimated recoverable resource, with an expected production rate of 30-40Mbbl/d.
• Jadestone Energy sign gas sales HoA: in January 2024 (not strictly 2023), Jadestone Energy signed a heads of agreement (HoA) related to the potential development of the Nam Du and U Minh gas fields located in Block 46/07 and Block 51. Jadestone holds 100% in these PSCs and the HoA is the first real progress towards developing the fields since 2019.

In addition, there appears to be some firmer progress around the Block B - O Mon project. However, we have been here a number of times in the past and we know positive talk does not always equal real progress. As a reminder, the project partners are PetroVietnam, PVEP, MOECO, and PTTEP.

This has all brought us into 2024 on a more positive footing, and once again asking the question: "Will this be the year E&P comes back in Vietnam?".

Energy mix

Vietnam was the 10th largest consumer of coal in 2022, making up nearly 45% of its primary energy consumption.

Whilst Vietnam has done a great job in developing renewables and hydro, these have generally been additive (i.e. meeting new demand growth) rather than replacing fossil fuels. With the commencement of LNG imports, we are likely to see some coal-to-gas switching over the next few years but, if we are going to see a much larger switching, then Vietnam will need to develop its domestic gas fields as it has the reserves to support this.

2023 M&A summary

2023 saw a single deal related to assets and companies in Vietnam, summarized in the table below.

More details can be found in my individual deal analyses and quarterly summaries.

International companies - The majors

There has been little in the way of change in the majors over the last 12 months, with no company movements, exploration drilling or developments. The majors currently active in Vietnam are:

• Eni: Eni have been present in Vietnam since 2012, holding a stake in five PSCs in the under-explored Song Hong and Phu Khanh basins. They have had exploration success in Block 114 (55% + operator, partner Essar) with the Ken Bau discovery in 2019 and subsequent appraisal. However, 2023 was a quiet year and they will need to focus on finding ways to monetize the discovered resources. Developing gas in this basin is challenged by the lack of onshore gas infrastructure and Ken Bau will compete against two other potential developments in the form of ExxonMobil's CVX and Vietgazprom's Bao Vang/Bao Den. Outside of Block 114, they drilled the Dan Tranh-1X exploration well in Block 115/09 (then 100%) in 2022, but the well was dry and they have since relinquished the block.
• ExxonMobil: hold a 63.75% in Block 118, in the Song Hong Basin that contains the CVX (Blue Whale / Ca Voi Xanh) gas discovery. Whilst the discovery is very large (>5 Tcf), development is challenged due to a lack of onshore gas infrastructure in the area and the high CO2 content (~30%) of the gas. It will also now have to compete against the Eni and Vietgazprom discoveries in the same basin. There have been ongoing rumours of a sales process around the asset for a number of years, although little confirmation has ever come out. Any buyer would need to commit to develop the project and believe that the associated power plants would also be developed. The rumour had been that Russian companies (Rosneft/Zarubezhneft) were the interested parties but I doubt that the current political climate would allow ExxonMobil to divest to a Russian company.

None of the other majors hold an upstream position or are likely to enter but a number have historically held an interest. Chevron had a significant operated position in both of the PSCs that make up the Block B gas project. However, after many years of frustration, they walked away in 2015, handing their stake to PetroVietnam. Other companies with historical positions in Vietnam are TotalEnergies (exited in 2013), ConocoPhillips (2012), BP (2011), and Shell (1990s).

International companies - Mid-caps

Vietnam is pretty barren when it comes to mid-caps, with only two companies present after a number of exits over recent years.

• Murphy Oil: as mentioned earlier, Murphy Oil have a strong position in Vietnam and are targeting growth. They took FID on the Lac Da Vang development in Block 15-1/05 (Murphy 40% + operator, partners SK Earthon and PVEP) in November and are also planning two exploration wells in 2024. The first, Lac Da Hong, is also in Block 15-1/05 and is targeted to spud in 2024 Q4. The second, Hai Su Vang, is in Block 15-2/17 (same ownership as Block 15-1/05) and is targeted to spud in 2024 Q3.

• Perenco: entered Vietnam in 2012 when they acquired ConocoPhillips interests in the country. This included Block 15-1 (23.25%), Block 15-2 (30.5%) and an interest in the Nam Con Son pipeline company (16.3%). In 2021, they divested their interest in Block 15-2 to Batavia Oil. Block 15-1 is the largest producing asset in Vietnam and has passed 400 MMbbl of oil production. However, the legacy PSC expired in September 2023 and I am yet to see any announcement of a new PSC or extension. This will limit investment and company movements until it is resolved.

We have seen a number of mid-caps exit over the last few years. Repsol exited the last of their Vietnam assets in 2021, MedcoEnergi in 2022 (although yet-to-complete), and Harbour Energy in 2023 (also yet-to-complete). I believe Mubadala Energy walked away from their assets (Block 07/03 / Blocks 135-136/03) in 2020 due to issues with overlapping claims that had halted the development of Ca Rong Do, but I have never seen this confirmed.

International companies - Smaller players

There are a select group of smaller IOCs with a regional focus that are active in Vietnam:

• Jadestone Energy: hold 100% interest in Block 46/07 and Block 51. As mentioned above, they signed a HoA for gas sales for the potential development of the Nam Du and U Minh fields in these blocks in January 2024. They will be hoping to see more progress on this project in 2024 with a view to taking FID. Given their 100% interest, they may look for a farm-in partner prior to development.
• Pharos Energy: have been active in Vietnam since the 1990s under their previous name of SOCO. They currently hold stakes in both Block 16-1 (TGT) and Block 9-2 (CNV) producing assets as well as an interest in exploration Blocks 125 and 126 in the Phu Khanh basin. Their plans for the producing assets focus on continued development, as well as extending these two PSCs. In the Phu Khanh basin, they are looking for a farm-in partner before committing to exploration drilling.
• Batavia Oil: the Singapore-based company entered Vietnam in 2021 through the acquisition of Perenco's 30.5% interest in Block 15-2. They could look for further acquisitions of similar scale.
• Hibiscus: entered Vietnam in 2021 through the acquisition of Repsol's 70% stake in Block 46. The block is adjacent to block PM-03 CAA, with production feeding into this asset. I see this being the limit to Hibiscus' ambitions in Vietnam, for now anyway.
• SPC: the Singapore-based PetroChina subsidiary hold an interest in the Blocks 102 & 106 PSC that has produced gas for the domestic market from the Thai Binh field since 2015. I don't see them expanding their role in Vietnam, particularly given the overlapping claims issues, but are likely to remain in this asset.

Domestic companies

Outside of the NOCs (PVN / PVEP) there a a limited number of domestic companies involved in the upstream industry.

• Bitexco / Big Energy: Bitexco (as Bitexco and also through subsidiary Big Energy) are a Vietnamese conglomerate who have been active in the domestic upstream space for over ten years. Recently, they have been expanding their domestic position through acquisitions. In 2021, they acquired Repsol's remaining asset in Vietnam: Block 15-2/01, which gives them a small interest in the TGT fields through a unitization agreement. In late-2022, it was announced that they had agreed to acquire MedcoEnergi's 31.875% stake in Block 12W. Then, in 2023, it was announced that they had agreed to acquire Harbour Energy's 53.125% operated stake in Block 12W. These two last deals are yet-to-complete but, once they do, they will give Bitexco their first operated position. I see them continuing to be active domestic buyers, and they have also stated they are looking at international expansion opportunities.
• SOVICO Group: another private conglomerate, but with less history in the E&P industry. They hold a 10% stake in Block 16-1/15 in the Cuu Long basin and a 30% stake in Blocks 125 and 126 in the Phu Khanh basin (operated by Pharos). Details of their future plans are limited but their public plans seem to be more focused on renewables.

Japanese companies

Japanese companies have maintained a light level of upstream involvement in Vietnam.

• JX Nippon: hold a 39.5% operated interest in Block 15-2 (partners Batavia Oil (Rang Dong only) & PVEP) that contains the producing Rang Dong and Phuong Dong oil and gas fields.
• Idemitsu: had been pretty active in Vietnam historically but now only hold a single asset, this being a 43.08% operated stake in the Blocks 05-1b and 05-1c PSC that contains the Sao Vang and Dai Nguyet fields. The development was approved in 2017 (an outlier during difficult years for PVEP) and came onstream in 2020, the field produces gas for the domestic market. They don't hold any other position and I haven't seen any growth ambitions.
• INPEX: hold a 36.92% stake in the Blocks 05-1b and 05-1c PSC (see above). As with Idemitsu, they don't hold any other position and I haven't seen any growth ambitions.
• MOECO: are holding out hope that the Block B - O Mon project will happen. They have a 25.62% stake in Block B & 48/9 and a 19.6% stake in Block 52/97.

Whilst none of these assets are on the market, they don't align with the typical strategy of Japanese companies. Generally, the focus would be on either gas-to-LNG or some form of integrated gas and power opportunity. Given this, I could easily see some of these assets come onto the market.

As with other countries in Southeast Asia, Japanese companies are also engaging with Vietnam on the energy transition and CCUS front. In 2022, JOGMEC signed a renewed Memorandum of Understanding (MOU) with PetroVietnam around hydrogen and ammonia production and CCS／CCUS projects. Based on the extended MOU, JOGMEC plans to investigate the feasibility of possible CCS／CCUS projects in Vietnam.

Korean companies

Korean companies have a decent history in Vietnam, with a conglomerate of Korean companies involved in Block 11-2, along with two companies holding individual interests.

• Block 11-2: KNOC holds 75% of participating interest in this block on behalf of a consortium of Korean companies consisting of LG International, Daesung Industrial, POSCO International, Hyundai Corp., and Seoul City Gas. PVEP holds the remaining 25% of the interest in the block. There had been plenty of reports in 2022 that a deal was in place for Zarubezhneft to acquire the consortium's interest. I believe this never materialized but the consortium could still look to exit. The asset contains the Rong Doi and Rong Doi Tay gas fields that have been in production since December 2006, with the gas sent to shore through the Nam Con Son pipeline. As of June 2023, the fields were producing about 44 MMscf/d (about 25% of peak) and KNOC have stated production will continue until 2024, so we look to be approaching the end of field life.
• KNOC: outside of Block 11-2, KNOC also hold a 14.25% interest in Block 15-1. See the comments on Perenco for details.
• SK Earthon: outside of Block 11-2, they also hold a 9% stake in Block 15-1 (see above/Perenco), a 25% stake in Block 15-1/05 and Block 15-2/17 (see Murphy Oil comments). In addition they hold a 70% operated stake in Block 16-2, where they announced an oil discovery in November 2023.

The regional NOCs

Southeast Asia has seen the regional NOCs take an increasingly important regional role outside of their home countries, with both PTTEP and PETRONAS established in Vietnam.

• PTTEP: have long had an interest in the upstream production in a country with which they share a maritime border. Their current producing interests come from Block 09-2 (25%), that produces oil and gas from the Ca Ngu Vang (CNV) field, and Block 16-1 (28.5%) that produces oil and gas from the Te Giac Trang (TGT) field. They also hold an interest in the Block B - O Mon project, with a 8.5% stake in Block B & 48/9 and a 7% stake in Block 52/97. They are likely to remain in their producing assets and will be looking to Block B for growth potential, I doubt they will chase fresh acquisitions.
• PETRONAS: also have a long history in Vietnam but have exited the majority of their upstream assets. Their only remaining asset is the Blocks 102 & 106 PSC (57.14% + operator) that produces gas from Thai Binh field. There had been rumours they were looking to exit, but this never progressed but I would imagine this would still be a divestment option. In late 2023, PETRONAS signed a Memorandum of Cooperation (MoC) with PETROVIETNAM to explore potential collaboration opportunities in Vietnam. The MoC covers potential collaborations in decarbonisation efforts, and the development of solutions in sustainable energy, LNG and petrochemicals.

Pertamina previously had presence in Vietnam through a stake in the Con Son JOC that was awarded the Blocks 10 & 11-1 PSC (partners PVEP and PETRONAS) in 2002. However, the discoveries in the blocks were never developed and the Pertamina eventually withdrew in 2017. I don't see them as likely to re-enter.

Indian companies

Two Indian companies have shown an interest in E&P in Vietnam.

• ONGC Videsh Limited (OVL): have been present in Vietnam since 1988, when they were awarded 100% interest in Block 06-1. They have since reduced their interest to 45%, with the partners being Zarubezhneft (35% + operator) and PVEP (20%). The shallow water block is in the Nam Con Son basin and produces predominantly gas from the Lan Tay, Lan Do, and Phong Lan Dai Deep (PLDD) fields. OVL have also shown an interest in the Phu Khanh basin, with two exploration blocks, Block 127 and Block 128, awarded back in 2006. Block 127 has since been relinquished but they have extended Block 128 a number of times. I expect them to maintain their interest in Block 06-1 but seem unlikely to look to grow and I don't believe they will commit to an exploration well in Block 128.
• Essar: entered Vietnam in 2010 through the award of Block 114 in the Song Hong basin. They have since farmed down their interest to hold 45%, with Eni (55% + operator) being their partner. Block 114 contains the 2019 Ken Bau discovery (see Eni for more details). They have made noises about looking for potential collaboration and business investment opportunities in Vietnam in the gas, power and downstream sectors, but they could also take the opportunity to cash-in on the discovery.

Russian companies

Given the historical political context, Russia is Vietnam's oldest E&P partner with a relationship that started in 1981 with the formation of Vietsovpetro, a JV between PetroVietnam (PVN) and Zarubezhneft. Further JVs have been formed involving both Rosneft and Gazprom. In return, PVN has been granted access to projects in Siberia.

• Zarubezhneft: hold a large number of assets, both through direct interests as well as having a 49% interest in Vietsovpetro (partner PetroVietnam, 51%). Their interests include Block 09-1, which contains the Bach Ho field that was the first producing field offshore Vietnam in 1986. Other producing blocks with an interest are Block 04-3 (Thien Ung), Block 06-1 (Lan Tay/Lan Do/PLDD), Block 09-3/12 (Ca Tam), Block 09-3 (Nam Rong-Doi Moi). On the development side, their focus is Block 09-2/09 (KNT/KTN), with the exploration blocks being Block 05-3/11, Block 12/11, and Block 16-1/15.
• Gazprom: hold direct interests as well as having a 50% interest in Vietgazprom (partner PVEP, 50%). Their main producing interest is the Block 05-2 & 05-3 PSC that produces gas from the Hai-Thach and Moc Tinh fields. Through their 49% stake in Vietgazprom, they hold interests in the Block 111/04, 112 & 113 PSC in the Song Hong Basin that holds the Bao Vang and Bao Den gas discoveries that could be developed to support a regional power plan but are rivalled by ExxonMobil's CVX and Eni's Ken Bau fields. In addition, Vietgazprom hold the interests to a number of exploration blocks in the Nam Con Son basin, namely Blocks 129, 130, 131, 132. However, these are challenged by China's overlapping claims.

In addition, Rosneft had previously held interests in Vietnam, Block 06-1 (Lan Tay/Lan Do/PLDD) where they had a 35% operated stake, as well as exploration Block 05-3/11 (100%). However, they sold their Vietnam assets to Zarubezhneft in 2021.

Assets on the market / potential opportunities

I am not aware of any formal processes currently ongoing in Vietnam. Therefore, the table below is a view of some of the potential asset opportunities:

In addition, there were reports that PVEP were looking for farm-down their interest in a number of their assets. This is likely targeted to improve their financial position, although with ongoing graft investigations may create a problem when it comes to completing any deal.

Questions and feedback

I have created this article through my own research. If you have any questions or feedback on the article then please drop me a DM.