Cost recovery in petroleum contracts in Vietnam

Cost recovery in petroleum contracts in Vietnam

Petroleum means crude oil, natural gas and solid or semi-solid hydrocarbons in the natural state, unconventional oil. Unconventional oil refers to coal gas, oil shales, shale gas, natural gas hydrates, bitumen, or other possible forms.

Pursuant to Article 33 of the Law on Petroleum 2022, contracting parties may enter into an agreement on cost recovery of the contractor in the petroleum contract according to the following regulations:

- The oil production obtained in a year shall not exceed 50% in terms of petroleum contracts for normal oil blocks;

- The oil production obtained in a year shall not exceed 70% in terms of petroleum contracts for oil blocks and fields to which investment incentives shall be given;

- The oil production obtained in a year shall not exceed 80% in terms of petroleum contracts for oil blocks and fields to which special investment incentives shall be given.

Cost recovery in petroleum contracts in Vietnam (Internet image) 

Petroleum contract area, return and extension thereof as well as consolidation of discovery of petroleum and oil and gas fields in Vietnam

Pursuant to Article 32 of the Law on Petroleum 2022, regulations on petroleum contract area, return and extension thereof as well as consolidation of discovery of petroleum and oil and gas fields are as follows:

- A petroleum contract area includes the area of one or more oil blocks prescribed in the petroleum contract.

- The contractor shall be responsible for partial return of the contract area in the end of each part of the exploration period and decommissioning of petroleum installations involved in the returnable contract area as prescribed in the Law on Petroleum 2022 and other related laws.

- The contractor has the right to submit a proposal to retain all the contract area or a proposal to temporarily relinquish the obligation to return the contract area in case the contractor submitted the proposal to continue to carry out hydrocarbon exploration and quantification of some potential structures involved in the contract area to be returned on the basis of the approval of the Ministry of Industry and Trade.

- In case of discovery of commercial hydrocarbons and an oil and gas field encroaches on the area of the adjacent available oil block, the contractor may submit a proposal for extension of the petroleum contract area.

- In case of discovery of commercial hydrocarbons and an oil and gas field encroaches on the area of one or more adjacent oil blocks for which the petroleum contract has been signed, contractors shall be permitted to propose consolidation of these fields for simultaneous quantification and development for the purpose of improving economic efficiency and optimally exploiting oil and gas resources.

- The contractor shall submit the proposal for extension of the contract area and consolidation of discovery of petroleum and oil and gas fields for simultaneous quantification as well as development to PVN for consideration, report it to the Ministry of Industry and Trade for appraisal and submit it to the Prime Minister for approval.

- In case of necessity to construct works and equipment outside the petroleum contract area in service of extraction, refining and transport of petroleum obtained from the contract area, the contractor shall be permitted to propose it in the outline field development plan (ODP), an early field development plan (EDP) (if any) and oil and gas field development plan, submit it for appraisal and approval as prescribed in Articles 46, 47 and 48 of the Law on Petroleum 2022.

- The Government shall issue regulations on documents and procedures for submission, appraisal and approval of the proposal for retention or temporary relinquishment of exercising obligation to return and extend the contract area and consolidation of discovery of petroleum and oil and gas fields.

Mai Thanh Loi

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