Petrovietnam Plans Over $1 Billion for Upstream Investment
After bottoming out in 2020, global investment in the upstream oil and gas sector has rebounded substantially, driven primarily by sustained high crude oil prices amid geopolitical tensions and constrained supplies.
Data from the International Energy Agency (IEA) shows that upstream investment grew by 11% in 2022 compared to 2021, and was estimated to have expanded by an additional 7% in 2023, with the Middle East alone recording a 33% capital expenditure surge last year.
Leading global organizations forecast crude prices to remain elevated through 2024–2025. The US Energy Information Administration (EIA) projects global crude consumption will rise by 1.4 million barrels per day this year, outstripping supply growth. Consequently, upstream investments are expected to remain robust with slight upward momentum.
Vietnam is aligning with this global upstream revival. Vietnam Oil and Gas Group (Petrovietnam) has ramped up capital expenditure post-pandemic, initiating a new development cycle for the domestic energy sector.
According to a recent report by VNDirect Securities, Petrovietnam plans to invest approximately VND 50,000 billion ($2 billion) this year, representing a 54% increase over actual capital expenditure in 2023, with upstream investments accounting for 52% of total planned capital outlays.
Historically, Vietnam's domestic oil and gas output declined steadily after 2015 due to a prolonged absence of large-scale upstream projects following the 2014 oil price collapse, which rendered major developments economically unviable.
Because upstream oil and gas projects span multiple years, Petrovietnam is anticipated to maintain substantial capital spending in the coming years, catalyzing domestic upstream activities from 2024 onward. This expansion will benefit domestic oilfield service providers, beginning with EPCI contractors and extending to drilling and offshore engineering services.
Recently, several domestic projects have registered significant breakthroughs. For instance, Murphy Oil (USA) reached the Final Investment Decision (FID) for the Lac Da Vang field development in late 2023.
For the Nam Du – U Minh project, Jadestone Energy (Singapore) signed a Heads of Agreement (HOA) with PV GAS in January 2024 regarding gas sales and offshore gas field development.
At the Su Tu Trang Phase 2B project, field partners are collaborating with competent authorities to negotiate and extend the Production Sharing Contract (PSC), paving the way for subsequent project phases.
At the Thien Nga – Hai Au project, the Zarubezhneft EP Vietnam joint venture is targeting offshore field development from 2025, planning offshore platform installation for Phase 1 in Q3/2025 with first commercial gas targeted for Q4/2026.
Anticipating FID for the Mega Block B – O Mon Project
Significantly, financial institutions forecast that Block B – O Mon, Vietnam's largest integrated gas-to-power project to date, is expected to reach its comprehensive FID in Q2–Q3/2024.
According to Petrovietnam, Block B will contribute approximately $19.2 billion to the state budget over its 20-year project lifecycle. Simultaneously, four gas-fired thermal power plants at the O Mon Power Center (Can Tho) totaling 3,810 MW will supply vital baseload power to southern Vietnam. Notably, domestic gas from Block B will enhance national energy self-reliance compared to imported LNG or coal.
With total capital expenditure exceeding $10 billion across upstream, midstream, and downstream segments, Block B – O Mon will provide substantial business impetus for Vietnam's oil, gas, and chemical engineering enterprises.
In late March 2024, MOECO—a key equity partner in Block B—announced its formal FID for the upstream project. Concurrently, Petrovietnam and its partners executed vital commercial contracts, including the Gas Sales Purchase Agreement (GSPA), Gas Transportation Agreement (GTA), Tie-in, Operation and Service Agreement (TOSA), and the Block B Gas Sales Agreement (GSA) between Petrovietnam and EVNGENCO2.
To guarantee synchronized execution across the chain, final investment decisions are awaited from remaining joint venture partners, notably Petrovietnam across upstream, midstream, and downstream scopes.
Given its paramount importance to national energy security, Petrovietnam is expected to resolve remaining commercial issues to issue the comprehensive FID, ensuring synchronized execution across the Block B – O Mon megaproject.
