Inevitable changes
Data from the Viet Nam National Industry-Energy Group (Petrovietnam) on the implementation of the 2022 Petroleum Law, which took effect on July 1, 2023, show that in the 2023-2025 period, the group’s domestic oil and gas reserve increase reached 38.8 million tonnes; output stood at 24.89 million tonnes of oil and 19.83 billion cubic metres of gas; and budget contributions totalled 480.2 trillion VND.
The 2022 Petroleum Law has created favourable conditions for Petrovietnam and contractors in petroleum activities to increase output and investment efficiency, generate new growth momentum, contribute to national growth and the State budget, and help safeguard maritime sovereignty and national energy security.
Alongside these positive points, the application of the law in practice has revealed many difficulties and obstacles arising in the new context. For example, oil and gas reserves at existing fields are declining rapidly, while many large fields have entered the final stage of their production life cycle. New discoveries, meanwhile, are mostly small or marginal fields located in deep-water, offshore areas with complex geological conditions, high investment costs and significant risks. This has made exploration, appraisal and field development increasingly difficult, especially as global oil prices fluctuate unpredictably and capital recovery periods are prolonged, reducing the attractiveness of Viet Nam’s petroleum investment environment to contractors.
In addition, the current contract mechanism has yet to fully cover arising situations involving small, marginal and complex fields, as well as cases requiring field unitisation or contract consolidation to optimise production efficiency. Although investment incentives have been improved, they remain insufficiently attractive to encourage investors to participate in projects with high risks, large costs and long payback periods. Moreover, several provisions of the 2022 Petroleum Law are not truly consistent with newly issued laws such as the Laws on Investment, Bidding, Land and Environmental Protection, leading to overlaps in implementation, prolonged procedures and higher compliance costs. Therefore, amending the Petroleum Law is considered necessary to unlock resources and meet the requirements for developing the energy industry in the new period.
Dr Nguyen Huu Luong, a senior expert at the Viet Nam Petroleum Institute (VPI), said the core point of this amendment should be a change in thinking and approach to the law’s scope of regulation. If the law previously mainly regulated traditional petroleum exploration, appraisal and exploitation activities, it should now be viewed as a legal foundation for developing an energy and marine industry ecosystem amid a strong energy transition.
Effectively exploiting resources
According to Dr Nguyen Huu Luong, Petrovietnam’s transition reflects a change in its development model, from an enterprise mainly operating in traditional oil and gas to an industrial and energy group with an increasingly expanded scope of operations and deeper participation in the energy value chain.
Fields such as LNG, gas-fired power, carbon capture, utilisation and storage (CCUS), hydrogen, offshore renewable energy and marine industrial services are all closely linked to the petroleum foundation, while also requiring new mechanisms for investment, resource use, marine space and risk governance. Therefore, the amended Petroleum Law should be designed in an open direction, creating a legal basis for enterprises to effectively exploit existing resources and promote linkages between petroleum activities and new energy sectors.
“In the current context, the amended Petroleum Law needs to further improve investment incentive mechanisms in a flexible manner, suitable to the specific characteristics of each petroleum block and field. For projects with complex conditions, there should be a reasonable risk-sharing mechanism between the State and investors to create momentum for exploration and appraisal activities. At the same time, administrative procedures should continue to be simplified, project approval times shortened, decentralisation and delegation of authority clearly defined, and policy stability and transparency ensured in order to create favourable conditions for enterprises to invest and develop,” Luong emphasised.
Given the particular characteristics of the oil and gas industry, with long investment cycles, large capital requirements, high risks, and direct exposure to geological conditions and the energy market, many specialised decisions during project implementation need to be handled in a timely manner. If they have to go through multiple levels of review and approval, project progress may be delayed, increasing costs and affecting investment efficiency.
Under the orientation for amending the law, Petrovietnam will be assigned to review, approve or consent to a number of matters on the basis of comments and appraisal by State management agencies as assigned by the Government, mainly the Ministry of Industry and Trade.
Referring to this issue, Dr Nguyen Quoc Thap, Chairman of the Viet Nam Petroleum Association, affirmed that decentralisation is truly effective only when it is accompanied by substantive decision-making authority, rather than merely transferring signing or approval authority while the process still has to pass through many layers.
In petroleum activities, time is cost. A project delayed by three to five years may face fluctuations in oil prices, equipment costs, interest rates, technology and the investment strategies of international oil and gas groups. Therefore, clear decentralisation and delegation of authority will help reduce time costs and opportunity costs for investors, and shorten the project implementation process from discovery, appraisal, approval of the field development plan (FDP) and final investment decision (FID) to the first flow of oil and gas.
From this reality, Thap said the amended Petroleum Law should clearly define the scope of authority of the Government, the Ministry of Industry and Trade, Petrovietnam and petroleum contract operators. In particular, it should specify the time limit for handling each procedure and the responsibility of each entity. Alongside expanding Petrovietnam’s authority, there should also be appropriate inspection and supervision mechanisms, as well as protection for implementers when they have made decisions within their authority and in accordance with due process, but the results fall short of expectations due to objective risks inherent in petroleum activities.
