Current regulations on terms of petroleum contracts in Vietnam

 Types of petroleum contracts and main terms of petroleum contracts in Vietnam

Pursuant to the provisions of Article 29 of the Petroleum Law 2022, petroleum contracts include the following two types:

(1) Oil and gas production sharing agreements.

(2) Other types of petroleum contracts.

Pursuant to the provisions of Article 30 of the Petroleum Law 2022, main terms of an oil and gas production sharing agreement include:

- Legal status, participating interests of contractors selected for signing the agreement;

- Eligible entities of the agreement;

- Area limit and schedule for return of contract area;

- Effective date, term and phases of the agreement, conditions for extension of the phases of the agreement and amendments to the agreement and extension thereof.

- Rights and obligation of contracting parties and operator;

- Minimum work obligation and minimum expenditure obligation in phases of the agreement;

- Rules for sharing of petroleum products and determination of recoverable costs;

- Rules for selection of contractors for provision of petroleum services and goods for petroleum operations;

- Rights of the host country for petroleum installations and assets after cost recovery and contract termination;

- Conditions for transfer of rights and obligation of contracting parties;

- Rights of PVN to participate in the agreement when a commercial discovery is determined and priority over purchase of participating interests, rights and obligation assigned by the contractor in the agreement whenever possible;

- Commitments to have commissions, training, scientific research funds and take priority over use of Vietnamese employees and services;

- Charges for environmental protection and safety measures conducted in petroleum operations; obligation to decommission petroleum installations;

- Requirements for termination of the agreement and handling of violations thereof;

- Methods for settling disputes arising from the agreement and applicable law.

Current regulations on terms of petroleum contracts in Vietnam (Internet image)

Regulation of duration of petroleum contracts in Vietnam

Pursuant to Article 31 of the Petroleum Law 2022, the duration of petroleum contracts is as follows:

(i) Duration of a petroleum contract shall not be over 30 years, where the hydrocarbon exploration period shall not exceed 05 years, except for the case prescribed in (ii)

(ii) For an oil block named in the list of oil blocks to which investment incentives and special investment incentives shall be given, the duration of the petroleum contract shall not exceed 35 years, where the hydrocarbon exploration period shall not exceed 10 years.

(iii) Duration of a petroleum contract may be extended at the maximum of 05 years and the exploration period may be extended but the extension period shall not exceed 05 years on the basis of the approval of the Ministry of Industry and Trade, except for the case (iv).

(iv) For reasons of national defense and security, complicated petroleum geology conditions, particularly disadvantageous field conditions for performing petroleum operations or in case of necessity to ensure effective gas extraction period, the Prime Minister shall approve of further extension of the duration of the petroleum contract and the extension period prescribed in (iii) on the basis of the appraisal of the Ministry of Industry and Trade.

(v) After the contractor declared that the discovery is commercial but consumer market is not found and appropriate requirements for pipelines and processing facilities are not met, the contractor may retain the discovered area. The further period in which the discovery area is retained shall not exceed 05 years on the basis of the approval for the Ministry of Industry and Trade.

In case the period in which the discovery area is retained expires but consumer market is not found and appropriate requirements for pipelines and treatment facilities are not met, the Prime Minister shall consider extending the period for not exceeding 02 years on the basis of the appraisal of the Ministry of Industry and Trade. During the further period, the contractor must perform works committed in the petroleum contract.

(vi) In case of force majeure that contracting parties consents to temporarily relinquish exercise of several rights and obligation mentioned in the petroleum contract, PVN shall send a report to the Ministry of Industry and Trade for decision.

The period in which several rights and obligation stated in the petroleum contract are temporarily relinquished due to force majeure shall be calculated from the beginning to the end of this force majeure.

(vii) The extension period of hydrocarbon exploration, the period in which the discovery area that is declared a commercial discovery is retained and the period in which several rights and obligation stated in the petroleum contract are temporarily relinquished due to force majeure or for the national defense and security reasons shall not be included in the duration of the petroleum contract.

(viii) The Government shall issue regulations on documents and procedures for extension of the duration of the petroleum contract and extension of the exploration period, and decide the period in which the discovery area is retained and the period in which several rights and obligation stated in the petroleum contract are temporarily relinquished due to force majeure or for the national defense and security reasons.

Mai Thanh Loi

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