Solutions sought to deal with reduction in oil and gas production

Reduction in oil and gas exploration and exploitation 

Currently, the majority of operating oil wells in Vietnam have been put into operation since the 1986-2015 period. Major wells have been exploited for 15-35 years and entering last periods of their life, resulting in a natural reduction in output of 15%-25% per year.

Statistics showed that domestic oil production dropped from 16.9 million tonnes in 2015 to 15.2 million tonnes in 2016, 13.4 million tonnes in 2017, 12 million tonnes in 2018, 11 million tonnes in 2019 and only 9.7 million tonnes in 2020. The figure is predicted to continue to fall in following years.

Despite efforts of oil and gas producers, including the Vietnam Oil and Gas Group (Petrovietnam), in seeking solutions to drill more wells, the number of infilling wells has remained modest and contributed only less than 10% of the production of the whole wells. Efforts to optimise the wells have only helped pick up the output of the wells by 1%-2%. 

Along with a reduction in oil production, gas exploitation plans of Petrovietnam for the next years are expected be cut due to difficulties in selling gas, especially the fall in demand on gas serving electricity production.

In the first nine months of this year, sales of gas for power generation were equivalent to only 72% of the firm’s figure in the same period last year and 70% of its plan. Compared to the plan assigned by the Ministry of Industry and Trade, the figure only reached 84% in the southeast region and about 70% in the southwest region. The drop has affected exploitation plans of wells.

For many reasons, the reduction in the real output and exploitation plans in the country is obvious despite the careful calculation of oil and gas firms.

Measures sought to maintain, improve production

In order to complete all oil and gas exploration and exploitation targets in the 2020-2025 period, Petrovietnam has rolled out numerous comprehensive measures in technical-technology, finance-investment, mechanism-policy, organisation and training.

However, amid the reduction in the production at wells, to maintain and enhance the production of oil and gas, the firm has defined that the operations of new wells as the key solution. Therefore, the firm has paid special attention to investing in seeking and exploring new oil fields.

Due to various risks in seeking and exploring of new wells, the ratio of success of explored wells is only 20%. At the same time, difficulties in administrative procedures for oil and gas exploration projects have hindered State-run firms and those with State capital such as Petrovietnam and PVEP to launch the projects. 

Vu Quang Nam, former Deputy General Director of PetroVietnam and Vice Chairman of the Petroleum Club said that the capital demand of the oil and gas sector is very high. He noted that it takes about US$10-US$15 million to seek and explore a normal well, not to mention risks during the process.

He stressed the need for capital resources and favourable mechanisms to facilitate the operations of businesses in the sector, especially in balancing their capital resources for re-investment.

According to the Vietnam Oil and Gas Association, due to the shortage in capital for exploration activities, the sector is facing an imbalance in the increase of reserve and production. At the same time, the shrunk search, exploration and exploitation activities, coupled with the rising cost for exploration and exploitation operations and complicated security developments in the East Sea, are believed to discourage foreign investors. Therefore, it is crucial to seek suitable and attractive incentives for them to draw more investment.

Alongside, experts also pointed to the need to apply short-term and middle-term measures to increase oil and gas reserve, including a change to conditions on sharing profits between the State and investors, the empowerment for Petrovietnam to approve technical changes to the plans of oil field development, and the ensuring of consumption from Vietnam Electricity.

Petrovietnam General Director Le Manh Hung underlined that the group has put exploration and exploitation activities to top priority. The potential of Vietnam’s oil and gas sectors remain great, therefore, in order to optimise the sector’s contributions to the country’s economic development and sovereignty protection, the promotion of search, exploration and exploitation activities should be conducted smoothly to attract investors and create new incomes for the country, he stated.