Central Asia

Russia committed to Vietnamese oil
By Sergei Blagov

MOSCOW - Having abandoned its sweetheart lease on the Cam Ranh Bay naval base, Russia remains nevertheless committed to helping its former Cold War ally sustain its crude oil output through the US$1.5 billion joint venture Vietsovpetro.

"Vietsovpetro will pump at least 13.5 million tons of crude a year till 2006," Russian deputy Prime Minister Viktor Khristenko announced in Moscow following talks with his Vietnamese counterpart, Deputy Premier Nguyen Manh Cam, on July 9.

Vietsovpetro, or VSP, remains by far Vietnam's biggest oil producer, accounting for some four-fifths of the country's total oil output. Vietsovpetro pumps crude oil and natural gas in waters off the southern port of Vung Tau.

Moreover, the official Russian RIA news agency quoted Khristenko as saying that VSP's geologists reassessed reserves of Vietsovpetro's main oil field, Bach Ho (White Tiger). According to previous estimates, the off-shore oil field contained 430 million tons of oil, while recently the figure was raised up to 498 million tons.

Initially discovered by Mobil in the closing months of Vietnam War drama in late 1974, basement reservoirs off the South Vietnam shores proved to be viable sources of oil and gas. According to Russian experts, output rates are likely to increase at White Tiger (Bach Ho) and Dragon (Rong) fields, both producing from basement reservoirs.

The White Tiger oil field has a depth of 5,000 meters, of which 4,000 meters consists of fractured basement granite. The White Tiger area is divided into three fault-bounded blocks: northern, central and southern. Traces of oil were also found in the basements of the Big Bear (South Con Son basin), and Bavi oil fields.

Apart from oil and gas, Russia is also eyeing Vietnam's hydropower sector. By September 2002, Russia and Vietnam are to complete talks of $100 million hydropower loan, which is due to be disbursed by the end of this year, Khristenko stated on July 9.

Last March, Prime Minister Mikhail Kasyanov traveled to Vietnam and hailed bilateral oil and gas cooperation and announced a $100 million line of Russian credit to finance two hydropower projects, the Pleykrong and Sesan-3, in Vietnam's Tay Nguyen region. Some 80 percent of Vietnam's electricity is being generated by Russian-built facilities, according to the Russian estimates. Kasyanov also said he had high hopes for the commissioning of the Dung Quat oil refinery, a project that has fallen behind schedule. He described Vietsovpetro and Dung Quat as Russia's most important projects in Vietnam.

The $1.3 billion Dung Quat plant had been due to be completed in two years as Vietnam's first major refinery, but Russia has said it could be delayed due to tendering difficulties. In August 1998 Russia and Vietnam agreed to build Dung Quat oil refinery in central Vietnam. PetroVietnam, and its Russian partner, state-run Zarubezhneft, each holds 50 percent equity in the 35-year project. The refinery is expected to cost a total of $1.3 billion. Russian oilmen expect up to $2.3 billion profit from Dung Quat expected 35 years of operation.

Russian officials also hailed positive developments in bilateral trade. "Through the first five months of this year, trade turnover between Russia and Vietnam reached $272 million or 32 percent up as compared to the same period of 2001," Khristenko was quoted by RIA on July 9. He claimed that bilateral trade turnover could reach $650-700 by the end of 2002. In 2001, Russia exported $360 million worth of goods to Vietnam, mainly machinery and steel, while Vietnam sold $190 million of merchandise to Russia, largely textiles and rice.

Moreover, on July 9 Russia's deputy Central Bank chairman Viktor Melnikov announced that Russia's Moscow International Bank had secured a $20 million credit facility from the state-owned Vietcombank. The facility, an unprecedented development in bilateral economic ties, is aimed at supporting Vietnamese exports to Russia.

First tenders to repay Vietnam's debt to Russia in kind will be held next September, Khristenko announced. He conceded that debt repayment schemes had turned out to be "somewhat slow." Kasyanov also said that in 2002 some $8 million from the debt repayment funds are to be used to train Vietnamese students at Russian Universities.

In September 2000, Russia and Vietnam agreed to cut the Soviet-era debt, previously estimated at $11 billion, by 85 percent and allowing for repayment of the rest over 23 years. Vietnam is to repay nearly $100 million in cash every year, while the remainder will be repaid in kind or re-invested in joint ventures in Vietnam.

In the meantime, military co operation seemingly becomes less important in the relations between Russia and Vietnam. Notably, on July 4 the Vietnamese Foreign Ministry announced that the agreement with Russia on Cam Ranh lease had been terminated from July 1 onward. Last October Russia announced shut down its strategic naval base in Cam Ranh even before expiration of its free lease.

According to a 1979 agreement signed by the former Cold War era allies, Moscow was not required to make payments for the lease which extended to 2004. Throughout the early 1980s the former USSR invested millions of dollars to repair and upgrade the base's infrastructure so it could receive nuclear submarines and host a regiment of the Soviet strategic bombers. However, in recent years the base was hardly used by the Russian navy.

Therefore, former Cold War era allies pledge to have their "traditional" partnership based on a pragmatic basis of vibrant economic cooperation. Subsequently, energy sector is set to remain a cornerstone of bilateral ties.

(©2002 Asia Times Online Co, Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)

Jul 12, 2002


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