Page 2 of
2 The making of Vietnam's oil
giant By Andrew Symon
strengthening international credit
rating is supporting new investments. The group is
looking to international bond markets to raise
finance, possibly as early as next year.
Vietnam is currently Southeast Asia's
third-largest oil producer, trailing only Malaysia
and Indonesia with an average output of 360,000
barrels per day. Because Vietnam lacks refining
capacity, at least until Dung Quat comes on line
in early 2009, it is also one of the region's
largest crude-oil exporters - perhaps the
largest. The group books its
own production as well as the production share it
gains from the operations of its various foreign
contractors and joint-venture partners, some of
which PetroVietnam has worked with for decades.
These include Russia's Zarubezhneft in the
long-standing Vietnasovpetro joint venture, which
operates Vietnam's largest oilfield, known as Bach
Ho, offshore of southern Vietnam. Other leading
foreign upstream companies in Vietnam are
ConocoPhillips, BP, Petronas, Chevron, the Korean
National Oil Corp, and Talisman Energy, which
operate as contractors to PetroVietnam under
production-sharing arrangements. PetroVietnam's
upstream arm usually takes a minority interest in
foreign-led operating consortiums, arrangements
that often entail substantial technology transfer.
PetroVietnam appears to be taking its
expansionist cues, at least partially, from other
Southeast Asian state-owned oil-and-gas giants,
particularly Malaysia's highly profitable
Petronas. Established in 1974, Petronas is
Malaysia's largest company, earning $44 billion in
revenues last year from 60 ventures in 26
different countries. International operations, not
including Malaysia's energy exports, now
contribute about 35% of the group's total revenue.
While benefiting in its role as regulator
from production-sharing revenues, Petronas also
worked hard from its early phases to develop
internationally competitive operational
capacities. PetroVietnam, likewise leveraging its
domestic monopoly strength, is trying to follow
suit by developing its operating capabilities
through its partnerships with foreign companies.
PetroVietnam, of course, is not alone in
its international pursuits. Other regional
national oil companies are trying to emulate the
Petronas model and the group's ability to profit
from international operations. Indonesia's
Pertamina, Thailand's PTTEP, the Singapore
Petroleum Corp, and the Brunei National Oil Corp
are all angling to develop more business overseas.
Southeast Asia's national oil companies
are different animals from the big international
private petroleum groups such as Shell, BP,
ExxonMobil, Chevron and the like. Some energy
analysts note that a good number of today's
multinational oil companies likewise evolved from
state companies, as in the case of France's Total
and Italy's ENI.
National oil companies
often command far greater petroleum reserves,
particularly as a result of production-sharing
systems where they include reserves in their
portfolio operated by contractor companies as well
as what they operate themselves through their own
upstream arms. And there can be no doubt that
their connections with government can assist their
business even it they are not being used as a
direct arm of government policy.
The fact
that Petronas hails from predominantly Muslim
Malaysia probably has helped it secure interests
in Sudan, Chad and Iran. PetroVietnam, on the
other hand, is playing on its old ideological
links with Communist Party-ruled states. Those old
fraternal ties came in handy for the recent deal
PetroVietnam inked in Cuba, building on a
cooperative agreement the two sides first signed
last October. Indeed, Vietnam's hard stand against
invading US forces in the 1960s and 1970s is
winning energy deals with other Latin American
countries antagonistic to Washington or in the
line of fire of its counter-terrorism policies.
Venezuela's anti-US president Hugo Chavez
visited Vietnam in July 2006 to sign a cooperation
agreement between PetroVietnam and Venezuelan
state oil company PDVSA. On the back of this,
PetroVietnam has partnered into a PDVSA-led
upstream project in Venezuela, and in return the
Venezuelan state concern is looking at investment
in Vietnam's embryonic oil-refining segment.
It's all part of an emerging, non-aligned
energy alliance that PetroVietnam and others are
slowly forging to give the Western energy majors a
healthy new market challenge.
Andrew
Symon is a Singapore-based journalist and
analyst specializing in energy and mining.
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