Vietnam slow on oil decision

[Dam Son <son@fermi.phys.washington.edu>]

   Monday, Mar 31, 1997: Vietnam Seen Slow To Make Key Oil, Gas Industry 
   Decisions
   
   Ho Chi Minh (DJ) -- Foreign participants in Vietnam's oil and gas
   industry remain frustrated by the slowness and complexity of
   government decision making affecting their projects, but they also
   seem largely resigned to it.
   
   At a pair of industry events here last week, representatives of
   foreign oil and gas companies repeatedly bemoaned the torpid pace at
   which Vietnam awards exploration rights and infrastructure projects.
   But they generally did so with a 'So what can I do about it?' tone and
   weary shrugs of their shoulders.
   
   'Things are moving forward, but not at a pace international companies
   would expect,' says the country manager of a European oil company, who
   asked to remain unnamed. Even more than in other industries, foreign
   oil and gas officials active in Vietnam are loathe to be quoted by
   name making comments that could be construed as even mildly critical.
   
   As foreign investors in other sectors often discover, the government's
   procedures for awarding and negotiating projects in oil and gas have a
   labyrinthine complexity, participants say. Additionally, state-owned
   Vietnam Oil & Gas Corp., or PetroVietnam, has an inordinate fixation
   on getting low costs, sometimes at the expense of quality, they say.
   
   'The Vietnamese are expecting too much,' says the business development
   manager of a prominent Asian oil company. 'No one comes here only to
   invest. They come to invest and make a return.'
   
   Haggling over pricing, a process in which PetroVietnam will sometimes
   ask one company to match or better the offers from others after bids
   have been submitted, is a key source of delay in project negotiations,
   industry participants say.
   
   Top PetroVietnam officials openly acknowledge their decision making
   doesn't flow swiftly, but defend the reasons for it.
   
   'I recognize we are taking decisions slowly,' Ho Si Thoang,
   PetroVietnam's chairman, Dow Jones in an interview.
   
   'We have to study very carefully,' says Ngo Thuong San, the company's
   president. 'If we move quickly, maybe we won't be so careful.'
   
   Besides the stated need for care, an unstated factor - jockeying for
   power over a potentially lucrative industry - also stymies decision
   making, players say.
   
   PetroVietnam is only one of several actors shaping oil and gas policy
   in the country. As in any institutional environment, particularly when
   money is at stake, these interests aren't necessarily aligned.
   
   Exchanges between government officials at an industry conference here
   last week offered a rare public glimpse at these tensions.
   
   On one day, a PetroVietnam official chided an official from the
   Ministry of Planning and Investment for not moving ahead more promptly
   with a national gas development policy.
   
   On the next day, Tran Quan Ngoc, the ministry's general director for
   investment in southern Vietnam, questioned the wisdom of locating the
   nation's planned first oil refinery in the remote fishing village of
   Dung Quat, 900 kilometers north of the country's main oil fields and
   its principal products market. PetroVietnam is adamant about
   proceeding at Dung Quat.
   
   'Normally you expect that to be kept in closed rooms,' says one
   conference attendee of the encounters. 'It's surprising that it's
   coming out in public.'
   
   And it's not only domestic politics that affects decision making, it's
   international politics, as well. 'Because Vietnam wants to be friends
   with all countries, politics sometimes gets in the way of what should
   be straightforward economic decisions,' the European oil company
   country manager says.
   
   But despite their frustrations with the pace of events in the last
   several years, executives say PetroVietnam now looks ready to push the
   gas pedal on a few key projects.
   
   The costs of putting off decisions further are becoming apparent. 'The
   government is feeling the early signs about what the economic
   consequences could be if it doesn't get some of these things awarded,'
   the European company's manager says.
   
   The most prominent of these is the Nam Con Son gas pipeline. The
   elaborate project would transport gas from fields controlled by
   British Petroleum Co. (U.BP), Norway's Statoil A/S (Y.SOL) and India's
   ONGC Videsh Ltd. (P.ONG) down a 400-kilometer pipeline where it would
   then be used to fire power plants, notably a $700-million electricity
   and urea plant that Australia's Broken Hill Proprietary Co. (BHP) is
   negotiating to build.
   
   The estimated cost of the entire integrated project is about $1.5
   billion, making it essentially the largest infrastructure project
   foreseen in Vietnam for several years.
   
   And it is progressing. 'We feel we're on the move,' says Nigel Newby,
   president of BP Vietnam. 'It's very positive.'
   
   BP's aim is to deliver the first gas from the pipeline in 1999. That
   goal is shared by others. PetroVietnam's San told reporters at the
   opening of the oil and gas exhibition, 'It's not only BP's target, it
   is also ours.'
   
   But a number of critical issues, such as currency convertibility and
   gas pricing, remain to be worked out.
   
   The project has significance beyond the oil and gas industry because
   of the slow progress until now on other large infrastructure projects
   involving foreigners. 'The potential for Vietnam to pull through a big
   project like this will be a great stimulus to everyone,' Newby says.
   
   BP has estimated recoverable reserves in one of the two Nam Con Son
   blocks at 58 billion cubic meters. It has reported a 'significant'
   find in the second block. The blocks are located off Vietnam's
   southeast coast.
   
   While the Nam Con Son project is the largest making headway now, it
   isn't the only one.
   
   After nearly three years, rights to offshore block 15-1, thought to be
   the nation's most promising unawarded one, seem to be on the verge of
   going to a consortium led by the U.S.' Conoco Inc.
   
   And after more than four years of different talks, the award of a
   $160-million gas processing plant near the southeastern coastal city
   of Vung Tau would seem to be drawing closer, now that the associated
   gas it will process has become available in substantial quantities.
   Enron Corp. (ENE) and BP are understood to be the two remaining
   candidates for the plant.