Key facts
- Japanese and U.S. companies are competing with Russian players for access to Vietnam's offshore oil and gas reserves.
- The Sao Vang Dai Nguyet gas field is located approximately 350 kilometers off Vietnam's coast in the South China Sea.
- PetroVietnam signed a gas sale-purchase agreement with two Japanese firms, Idemitsu Kosan and Teikoku Oil (Con Son) Co., for the Sao Vang-Dai Nguyet project.
- The project is expected to start commercial gas production in the third quarter of 2020.
- Vietnam's crude oil output decreased by 11.3% in the first seven months of the year compared to the previous year.
New oil and gas projects are emerging off the coast of Vietnam, a region known for its rich energy reserves. Japanese and U.S. companies are competing with Russian players to tap into growing demand, which is further amplified by ongoing tensions in the Middle East. The Sao Vang Dai Nguyet gas field, situated approximately 350 kilometers off Vietnam's coast in the South China Sea, is a focal point for these developments.
PetroVietnam, Vietnam's state oil firm, has signed an agreement with two Japanese companies, Idemitsu Kosan and Teikoku Oil (Con Son) Co., to sell gas from this block. The deal, signed in Hanoi, is seen as significant for ensuring the country's energy security, especially as exploration and production activities have faced slowdowns due to South China Sea tensions, a domestic anti-corruption crackdown, and low crude oil prices. The Sao Vang-Dai Nguyet project is expected to commence commercial gas production in the third quarter of 2020.
Despite the potential, Vietnam's energy sector faces challenges. Maritime tensions with China, particularly concerning China's expansive "nine-dash line" claim in the South China Sea, have impacted offshore exploration. Previously, PetroVietnam was reportedly asked by Spanish firm Repsol to halt an offshore oil project due to pressure from China, and Russia's Rosneft has also expressed concerns about potential disruptions. Furthermore, an anti-graft crackdown in Vietnam has led to trials of several high-profile executives from state firms, including PetroVietnam.
Vietnam's crude oil output has seen a decline, with a 11.3% decrease in the first seven months of the year compared to the same period in the previous year, totaling 7.16 million metric tonnes.