Vietnam Oil & Gas Report Q2 2014: New research report available at Fast Market Research

From: Fast Market Research, Inc.
Published: Wed Apr 16 2014

Oil production is set for robust growth in the short-term, as new projects are brought online or ramped up to peak production levels. However, after peaking in 2016, we forecast output to fall, as new discoveries are insufficient to offset declining volumes from the flagship Bach Ho field. New developments have the potential to boost long-term gas production, but we note that stalled progress on the Block B project could dampen the country's mid-term gas production outlook.

The main trends and developments for Vietnam's oil and gas sector are:

* Total crude oil and liquids output will rise in the short term as new fields are brought online or are ramped up to peak production levels. This could push production up from an estimate of 377,450 barrels per day (b/d) in 2013 to 426,170b/d by 2016. However, this spell will end in 2017 unless further fields are developed. BMI therefore expects production to decline from its 2016 peak to 373,560b/d by 2023.
* Economic growth - expected to average at 6.7% over our 10-year forecast period to 2023 - will continue to drive oil and gas consumption in Vietnam higher over the next decade. However, BMI's Country Risk team holds the view that Vietnam's costly welfare subsidies will need to be gradually withdrawn as part of the government's broader efforts to fix its fiscal imbalances and as such, we expect further price hikes to come. This has led us to moderate our forecasts for Vietnam's oil consumption growth rate. We expect total refined oil products consumption (previously referred to as total oil consumption) to rise at a slower rate from an estimate of 389,160b/d in 2013 to 459,970/d in 2018 and 533,230b/d by 2023.
* BMI estimates gas production will rise from an estimated 12.04bn cubic metres (bcm) in 2013 to 14.06bcm by 2018. However, we flag Chevron's exit from the major Block B project as indication of the ongoing challenges facing investors in the country's gas sector. Although several companies have expressed interest in the project, unless Vietnam can offer more attractive gas pricing terms, progress on the block's development may be stilted. Gas demand will outstrip supply from 2015, with up to 0.7bcm of net imports expected in that year. By 2023, net imports of gas could hit as much as 5.8bcm, all in the form of liquefied natural gas (LNG).
* Oil and gas reserves could rise if new exploration gathers pace. However, ongoing risks from vigorous Chinese opposition to drilling in the disputed South China Sea could delay exploration. Therefore, for 2014 we have kept our oil reserves forecasts unchanged at 4.4bn barrels (bbl). However, Vietnam could still find it difficult to reverse a longer-term decline in reserves as production ramps up to meet rising domestic needs faster than discoveries are made to replace reserves. By end-2023, we expect proven oil reserves to have fallen to 4.2bn barrels (bbl).

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