Rosneft Starts Drilling Offshore Vietnam

Rosneft Vietnam has started drilling exploration wells offshore Vietnam. The well, PLDD-1X at Block 06.1, is Rosneft’s first drilling project outside Russia.

The design depth of the well will be around 1,380 meters, while the sea depth in the area is about 162 meters. The expected recoverable reserves of natural gas in the PLDD geological structure are estimated at 12.6 bcm, and 0.6 mt of gas condensate which can be developed by subsea completion and tied-back to the existing Lan Tay platform operated by Rosneft in Block 6.1.

The drilling will be performed using the Hakuryu-5 drilling rig owned and operated by Japan Drilling.

Following PLDD the company will drill another exploration well in Block 05.3/11 also in the Nam Con Son basin. Rosneft Vietnam BV also plans to shoot broadband 3D seismic of its existing Block 6.1 operatorship later this year to enhance ongoing production recovery and explore potential in deeper prospects.

Rosneft is currently involved in projects of gas and condensate production and exploration in two blocks offshore Vietnam:

Block 06.1: Rosneft Vietnam owns 35 percent of the project and is the project operator; The project is based on the Production Sharing Contract (PSC). The PSC area comprises two gas condensate fields – Lan Tay and Lan Do. The deposits are located 370 km off the coast in the Nam Con Son basin with a sea depth of up to 190 meters. The field's initial gas reserves are about 68 billion cubic meters. By June 2015, the block produced its 300-millionth barrel of oil equivalent (or more than 46 billion cubic meters of gas). In 2015, the gas produced in Block 06.1 provided about 12 percent of the energy needs in Vietnam.

Block 05.3/11: Rosneft Vietnam B.V. owns 100 percent of the project and is the project operator. The license area is located in the region with proven oil and gas content and infrastructure, and is adjacent to fields under development in Block 06.1. The resources of block 05.3/11 are currently estimated at about 40 billion cubic meters of gas and nine million tons of gas condensate.

Rosneft also owns 32.67 percent of the Nam Con Son pipeline, which delivers gas and condensate from the offshore blocks of the Nam Con Son basin to the onshore power generation complex, which creates potential synergies when commercial reserves in Block 05.3/11 are discovered.

Commenting on the drilling start, Rosneft Chairman of the Management Board, Igor Sechin said: “Rosneft team has already demonstrated their competence in Russia during the successful drilling of the world's northernmost well in the Kara Sea, which resulted in the discovery of a new deposit, the Pobeda field. Today, the company starts a similar project as a drilling operator in international waters.

“I am sure that the experience gained in Vietnam will be used by the company not only in its activity in the southern seas; these competences will find application in planning and implementation of upstream projects in remote areas. I would especially like to emphasize that this project is an example of advanced cooperation with the company's partners in the Asia-Pacific: Petrovietnam and ONGC. We appreciate not only the current progress of joint projects implementation in Vietnam, but also the future prospects for their development.”

Vietnam Emerging as Important Producer

Over the past few decades Vietnam has emerged as an important oil and natural gas producer in Southeast Asia. Vietnam has boosted exploration activities, allowed for greater foreign company investment and cooperation in the oil and gas sectors and introduced market reforms to support the energy industry. These measures have helped to increase oil and gas production. Also, the country’s rapid economic growth, industrialization and export market expansion have spurred domestic energy consumption over the past decade.

Vietnam held 24.7 trillion cubic feet (Tcf) of proved natural gas reserves at the end of 2015, up from 6.8 Tcf in 2011, according to OGJ. Half of these reserves are located in the northern deepwater areas of the Song Hong basin and have high carbon dioxide contents, making the production investment costly. Major new developments are expected from ExxonMobil’s CaVoi Xanh field and the overlapping basin with Malaysia. However, low natural gas prices and the lack of gas infrastructure outside of the southern part of the country are impediments to upstream investment.

Vietnam produced 376 billion cubic feet (Bcf) of marketed natural gas in 2015, up nearly five percent from 2014 levels, all of which was domestically consumed. The country is still self-sufficient in natural gas, but PetroVietnam predicts a growing supply gap characterized by demand surpassing supply, particularly in the power sector in southern Vietnam.

The Vietnamese government plans to import LNG in the southern part of the country to help satisfy the growing demand for gas especially in the power sector. PetroVietnam Gas, a subsidiary of PetroVietnam, is developing the 48 Bcf/y-Thi Vai LNG terminal in the Vung Tau province in southern Vietnam, which is expected to be operational in 2018. A second terminal, Son My LNG, with 86 Bcf/y of capacity, is also proposed to come online in 2020. Subsequent phases are planned for the early 2020s.