What should the industry know about Petrovietnam as an operating company?

As a state-owned economic group, Petrovietnam is assigned by the government of Vietnam to conduct and manage petroleum operations in the country. Established 35 years ago, Petrovietnam originally focused exclusively on petroleum E&P activities within Vietnam. Today, we are not only a domestic player, but an international player. We are not big yet, but we are growing.

Petrovietnam holds participation interest in around 20 overseas projects in Malaysia, Indonesia, Myanmar, Iran, Algeria, Peru, Cuba, Venezuela, Russia, etc. The company’s target is to increase the petroleum production from overseas projects to as much as half of our total production volume in the future.

Dr. Do Van Hau, vice president, Petrovietnam. (Image courtesy of GE Oil & Gas)

In earlier years, we were just a non-operating partner and signed petroleum contracts on behalf of the host company. Now we are becoming a real operator as well. We directly operate some projects inside Vietnam and overseas.

Petrovietnam has been growing quite fast in the last few years, both vertically and horizontally.

To support the petroleum operations, we are expanding our service capabilities in terms of technical services as well as things like financing and insurance, which are now widely used by Petrovietnam and our partners in Vietnam. Keeping E&P as our core business, Petrovietnam is actively growing its infrastructure by having more businesses in the network of distributing oil products, power generation, and other areas like construction.

We are now fabricating jackups, topsides, jackets, hulls and as well as FPSOs (floating, production, storage, and offloading vessels).

What is Petrovietnam’s biggest investment to date?

So far, the biggest investment for Petrovietnam is in exploration activities to find and add more reserves and to sustain production. According to our plan, domestic petroleum reserves should increase by between 200 MMboe and 250 MMboe per annum. We have considerable acreage and now have our own seismic vessels. We shoot seismic ourselves and are identifying drilling targets.

What types of plays are of most interest?

As an operator, Petrovietnam is focusing in two areas. Our primary focus is in the Cuu Long basin, where the majority of oil in Vietnam is produced. There are some relinquished blocks in the basin, and we are now operating the petroleum activity on this acreage. Another prospect is the remote areas of the continental shelf of Vietnam, where exploration is required.

What partnerships do you have with operators outside Vietnam?

Petrovietnam is in alliance with many companies in its overseas projects. We just signed in December of 2009 a strategic cooperation agreement with Gazprom to establish Gazpromviet Joint Venture Company (in Russia).

To level up our cooperation with key partners in petroleum projects, we have signed strategic partnership agreements with several international petroleum companies, including Gazprom, Zarubezhneft (Russia), Total, BP, ExxonMobil, KNOC, Petronas, Pertamina, PdVSA, Sudapet, and others.

What does Petrovietnam look for in a partner?

Petrovietnam actually is looking to have partners not only with national oil companies, but with international and independent oil companies, preferably those that have a presence in Vietnam now.

Of course, we are looking overseas to look for additional reserves in production. And we are investing in those areas where we have a very good traditional political relationship.

How significant is technology to your plans to expand E&P?

We understand that technology is important, but the most significant resource for us is our human resource. We do not possess the newest technology or know-how like some of the major international oil companies like BP and ExxonMobil, but we follow the proven new technologies that have been applied in the E&P industry.

What are some of the company’s biggest challenges?

The big challenge for us, besides human resources and technology, is of course, financing. We do face problems with financing. We are working to keep it in our control.

Of course, the global recession compounded financial issues for a lot of companies around the world, but although last year was a difficult year for many companies, for Petrovietnam, it was a successful year. We surpassed all of our targets.

It was good that the oil price on average was US $70 because at that level, it was quite feasible for us to maintain our investments and be profitable.

Is Petrovietnam investing in renewable energy sources?

Biodiesel is one of the primary renewable energy focuses for Petrovietnam. We are now investing in three biodiesel facilities with a total capacity of 300,000 metric tons annually. We also have wind power generation projects in the pilot stage and are conducting negotiations with our foreign partners for commercialized projects. In addition to these projects, we are investing in solar energy systems on our islands that cannot access conventional electricity due to transmission obstacles.

These renewables projects are very import and feasible for Petrovietnam, since the country has huge resources.

How does the carbon debate figure into your plans?

It is a sensitive issue.

Although there is a relatively small number of cars pr 1,000 people in Vietnam, there are a lot of motorbikes. This is not a big contributor to carbon emissions, but with the dramatic increase of motorbikes and cars in Vietnam today, the contribution to carbon emissions from this segment will grow.

Another considerable source of carbon dioxide emission is coal-fired power generation plants, which account for 20% to 25% of the total amount of electricity produced in Vietnam.

Only a small amount of coal is used for electricity generation in Vietnam. At present, about 40% of domestic electricity is generated with hydro power, and another 40% to 45% or so is gas powered. The remaining amount is coal. In the next few years, though, the share of power generation generated from coal is going to grow.

We have been working on CDM (Clean Development Mechanism) to reduce carbon dioxide emissions by limiting gas flaring. We also have coal fired power generation plants, which can be quite big issues in terms of carbon emissions. We are working with different organizations to develop the expertise to limit emissions. We also pay attention to application of new technology in our power projects to reduce the carbon dioxide emission.

Is Petrovietnam struggling like other oil companies to attract new engineers?

In Petrovietnam, the problem is not in attracting young engineers. We have enough young engineers because the company is already desirable for young people. Our problem is how to keep the experienced engineers. Like nearly every operating company, we have a shortage of experts.

We have implemented personnel policies that we hope will make staying at Petrovietnam attractive to more people who have the choice to continue working or retire. And we want to ensure that our young engineers have a career path so they gain experience and stay within the company to put that experience to work at home.