Finalization of guarantee fund for fulfillment of decommissioning obligations in Vietnam

Management and use of guarantee fund for fulfillment of decommissioning obligations in Vietnam

Management and use of guarantee fund for fulfillment of decommissioning obligations (decommissioning fund) in Vietnam comply with the provisions of Article 53 of Decree 45/2023/ND-CP, specifically as follows:

- Decommissioning fund shall serve decommissioning of petroleum installations. Contractors shall tap into the fund for the purpose of decommissioning petroleum installations in accordance with approved decommissioning plan.

- If contractors are unable to decommission petroleum installations according to approved decommissioning plan due to PVN’s inability to replenish guarantee fund for fulfillment of decommissioning obligations, the contractors are relieved from decommissioning obligations corresponding to the unreplenished portion while the PVN shall fulfill the decommissioning obligations from which the contractors are relieved.

- If contractors are not required to decommission or only required to partially decommission petroleum installations, the entirety or part of decommissioning fund corresponding to the entirety or party of petroleum installations required to be retained shall remain under management of the PVN and shall be used for decommissioning petroleum installations that are no longer required for petroleum operations or safety operation of which can no longer be maintained.

In this case, the PVN shall cooperate with contractors in determining amount of decommissioning fund at the time in which the PVN receives use right of the fund while the contractors are responsible for donating the missing amount which is determined in accordance with Article 52 of Decree 45/2023/ND-CP.

When contractors have made additional donations to decommissioning fund and transferred fund use right to the PVN, the contractors shall be relieved from obligations to the entirety or party of petroleum installations that have not been decommissioned and relieved from obligations to contingency costs for decommissioning of petroleum installations (if any).

- On an annual basis, the PVN shall audit and verify donations to decommissioning fund, disbursement from the fund, and costs incurred by the contractors.

Finalization of guarantee fund for fulfillment of decommissioning obligations in Vietnam (Internet image)

Finalization of guarantee fund for fulfillment of decommissioning obligations in Vietnam

Finalization of guarantee fund for fulfillment of decommissioning obligations shall comply with the provisions of Article 54 of Decree 45/2023/ND-CP, as follows:

- Within 9 months from the date on which partial or total decommissioning of petroleum installations under petroleum contracts, contractors must produce decommissioning completion report for partial or total decommissioning, request the PVN to approve, and request the Ministry of Industry and Trade to monitor.

- Primary contents of decommissioning completion report include:

+ Description of petroleum installations and actual decommissioning work conducted;

+ Decommissioning progress;

+ Assessment of changes between actual decommissioning operation and approved plan (if any);

+ Actual decommissioning costs;

+ Summary of environmental remediation operations implemented, including: implemented solutions for collecting, transporting, and processing waste and refuse;

+ Responsibility for retained installations (if any).

- Sale value of refuse collected during and after decommissioning process shall be recorded and dealt with during finalization of decommissioning fund in accordance with Clause 4 and Clause 5 of Article 54 of Decree 45/2023/ND-CP.

- Within 30 days from the date on which the PVN approves decommissioning completion report, contractors shall cooperate with the PVN in finalizing decommissioning costs ( including sale value of refuse mentioned under Clause 3 of Article 54 of Decree 45/2023/ND-CP).

- If contractors decommission petroleum installations at the end of petroleum contracts, balance of decommissioning fund, after finalization and fulfillment of financial obligations of petroleum contracts, shall be dealt with as follows:

+ If contractors have recovered donations to decommissioning fund, fund balance, after fulfilling financial obligation in accordance with petroleum contracts, shall be distributed to contractors and the PVN depending on profit oil ratio applicable to the highest production scale implemented during effective period of petroleum contracts;

+ If contractors have not fully recovered their donations to decommissioning fund, the remaining fund balance shall cover the unrecovered amount.

Fund balance after allowing contractors to recover their donations (if any) and fulfilling financial obligations according to petroleum contracts shall be distributed between contractors and the PVN depending on profit oil ratio applicable to the highest production scale implemented during effective period of petroleum contracts.

- If the PVN receives decommissioning fund and directly implements decommissioning, fund balance after finalization shall be submitted to state budget.

- On an annual basis, the PVN shall submit reports on management, use, and finalization of decommissioning fund to the Ministry of Industry and Trade and Ministry of Finance.

Mai Thanh Loi

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