New regulations on the retention of petroleum installations upon decommissioning of petroleum installations in Vietnam from November 4, 2024

New regulations on the retention of petroleum installations upon decommissioning of petroleum installations in Vietnam from November 4, 2024 (Internet image)

On September 16, 2024, the Minister of Industry and Trade of Vietnam issued Circular 16/2024/TT-BCT, stipulating the preservation and destruction of petroleum wells and the decommissioning of petroleum installations.

1. New regulations on the retention of petroleum installations upon decommissioning of petroleum installations in Vietnam from November 4, 2024

According to Article 26 of Circular 16/2024/TT-BCT, the retention of petroleum installations upon decommissioning of petroleum installations operations in Vietnam is implemented as follows:

- The retention of part or the entire oil and gas structure is carried out in accordance with Article 55 of Decree 45/2023/ND-CP.

- In cases where organizations or individuals have fully fulfilled financial guarantee obligations according to the approved cleanup plan, the retention of part or the entire oil and gas structure will be considered under the following circumstances:

+ Technically infeasible to perform the cleanup of the oil and gas structure;

+ Proposed cleanup solutions do not ensure the safe recovery of the structure;

+ Cleanup operations may endanger human life or cause severe marine environmental impacts without affecting maritime safety;

+ Unburied marine pipelines have naturally buried themselves over time and are in a state akin to being buried or partially exposed but the organization or individual provides a covering solution;

+ Wellhead equipment; submerged structures; piles, pipes, concrete anchors, seabed templates located at sea depths of at least 500 meters, except for special reasons related to national defense or security;

+ The cutting of well casings, piles, pipes, and other seabed structures from the seabed up;

+ petroleum installations demonstrate a benefit from retention.

- Proposed content for retaining petroleum installations includes:

+ Current status of the oil and gas structure;

+ Reasons for proposing retention;

+ Risk management strategies;

+ Solutions to ensure integrity;

+ Conclusions and recommendations.

- Responsibilities of organizations or individuals for retained petroleum installations:

+ Setting up devices and maritime safety warning systems for retained structures as per maritime laws;

+ Transferring the entire financial guarantee fund for cleanup obligations to undertake the cleanup according to Articles 53 and 54 of Decree 45/2023/ND-CP;

+ Transferring the oil and gas structure to PetroVietnam or an entity approved by the competent authority.

2. Regulations on the management and usage of the funds to ensure the obligation to decommission petroleum installations in Vietnam

The management and usage of the funds to ensure the obligation to decommission petroleum installations in Vietnam are stipulated in Article 53 of Decree 45/2023/ND-CP as follows:

- The financial guarantee fund for cleanup obligations is used for the purpose of cleanup operations. Contractors are permitted to use the fund to fulfill cleanup obligations in accordance with the approved cleanup plan.

- If contractors cannot implement the cleanup according to the approved plan because PetroVietnam cannot reimburse the full value of the financial guarantee fund, the contractors will be discharged from the cleanup obligations corresponding to the unreimbursed portion, and PetroVietnam will be responsible for cleaning the remaining structures.

- If contractors are not required to clean up or only partially clean up structures, the corresponding fund value or part of it remains managed by PetroVietnam for direct use once the structures are no longer needed for oil and gas activities or cannot continue operating safely.

In this scenario, PetroVietnam cooperates with the contractor to determine the fund value at the time of fund usage transfer, and the contractor must contribute any shortfall, as determined by procedures in Article 52 of Decree 45/2023/ND-CP.

After the contractor completes the supplementary contribution and transfers fund usage rights to PetroVietnam, they are discharged from all remaining cleanup obligations and any future significant cleanup costs.

- Annually, PetroVietnam audits and confirms the values of contributions made, disbursements from the fund, and actual costs incurred by the contractor.

More details can be found in Circular 16/2024/TT-BCT, which comes into force in Vietnam from November 4, 2024, which replaces Circular 17/2020/TT-BCT by the Minister of Industry and Trade regarding the preservation and decommissioning of oil and gas wells.

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