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New Partnerships on the Horizon

№ 5 (May 2009)

Gazprom – PetroVietnam
New Partnerships on the Horizon

   “Stability is a sign of skill,” they say. It’s easy to mull about stability in “peaceful” times, or to compare profit ratios to currently trendy EBITDA figures. It’s easy to forecast, and it is even highy probable that the forecasts would come to fruition.

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   Yet, the real stability is verified in calamity times, such as the recent economy crisis. The stable company would keep on its work and its obligations. In these difficult times, Russia’s Gazprom embarked on seismic survey at four new blocks of Vietnam sea shelf.

   On February 6, 2009 in Hanoi-based Ministry of industry and investment, Gazprom received the Investment certificate (licence) that initiated the upstream contract on Blocks 129, 130, 131, and 132 of Vietnam’s continental shelf. On the ceremony Russian side was represented by a delegation of Gazprom Zarubezhneftegaz.
 
   The document covers the details of E&P work on these blocks on PSA terms. Vietgazprom, a joint company of Gazprom and PetroVietnam, has been set up as the project operator.
 
   Gazprom Zarubezhneftegaz order on the feasibility study for exploration on Blocks 129-132 has been prepared by VNIIGAZ R&D center and then studied and approved by appropriate Russian and Vietnam organizations.
The blocks lie in north-north-east of Sothern Konshon productive basin, which is the least explored part of the area.
 
   The minimum exploration schedule includes complex geophysical and geochemical research and drilling two “wild cats”. The major work challenge is presented by the full-scale unified-approach 2D seismic work – the target area is estimated at some 20,000 linear kilometers.
 
   The work will be completed in three years. In 2009 Vietgazprom plans to complete 8,800 linear kilometers of 2D seismic survey. The Professor Polshkov geophysical vessel has already started profiling the area.
On the results of 2D seismic exploration for structures and geochemical signatures, the company plans to run further 3D seismic surveying of 1,000 square kilometers. Exploration data will be supported by differential-normalized electric prospecting of some 1,000 square kilometers and detailed geochemical exploration.
 
   To ensure performance gains the planned exploration will be supported by geologic-informational monitoring, i.e. integrated processing and evaluation of geophysical fieldwork materials. 
 
   To streamline explooration and production of the Blocks 129-132 offshore Vietnam mainland, Gazprom, Gazprom Zarubezhneftegaz, PetroVietnam and PVEP inked an upstream contract on 27 October 2008.
In Moscow the document was signed by Gazprom’s head Aleksei Miller and PetroVietnam head Chan Ngoc Khanh in the presence of the Presidents of Russia and Vietnam. The contract covers 30 years, with optional five-year extention.
The decision to boost the cooperation between the two companies was reached in May 2008 talks between Aleksei Miller and Vietnam President Nguyen Minh Triet in Hanoy. At the time, in parallel to talks on developing Vietnam’s unified gas supply network and projects in third countries, the head of Gazprom reinforced the position of Russia’s gas giant in the republic.
 
   For over 20 years geologic exploration work is curried out on Vietnam’s continental shelf, which has already led to discovering a number of oil and gas fields, including giant and major fields.
 
   Cooperation between Gazprom and Vietnam state-owned PetroVietnam gained a new boost when the two companies inked the protocol on cooperation in the fall of 1997. At that time the companies voiced the plans on joint exploration and production in Vietnam. The document also notes that the companies will study the options on cooperating in prospective projects in third countries, including exploration and production projects. Gazprom and PetroVietnam are ready to cooperate in research and development, professional development courses and personnel training as well.
 
   During the meeting of Russian and Vietnam Presidents in Moscow on 11 September 2000, the sides have initiated cooperation within the framework of the earlier agreement. On Vietnam’s recommendations, Gazprom, PetroVietnam, its subsidiary PetroVietnam Observant Company and Zarubezhneftegaz have signed an upstream contract on developing Block 112 in Bak Bo Gulf, one the most promising blocks in the area.
 
   According to the contract, Zarubezhneftegaz and PetroVietnam’s subsidiary have set up a 50-50 JV Vietgazprom as the main contractor at the Block 112 development project. The contract covers 25 years, with optional fiver-year extention. 
 
   The date of Vietgazprom creation (21 June 2002) is taken as the date of the
upstream contract’s coming into force. According to the contract, the Russians provide 100 percent financing of the exploration work up till the definition of the borders for the first production area. However, the company will start to compensate its outlays from the day one of industrial production of natural gas, as specified in mutually agreed terms of the project.
 
   In August 2007 the company did a successful test run of the wild cat in Bao Vang area of Bak Bo Gulf, getting the industrial grade stream of natural gas. The exploration work on the Block 112 resulted in opening the Vo Bang gas condensate field with proven reserves in two horizons.
This field could provide Gazprom with a foothold for full-scale exposure to Vietnam-based gas projects, enabling the company to help in creation of the whole new branch of economy.
 
   The cooperation of Gazprom and PetroVietnam gained a new impetus in November 2006. During the official visit of Russia’s President Vladimir Putin to Vietnam, Gazprom’s head Aleksei Miller and Chan Ngoc Khanh, head of PetroVietnam, signed the agreement on cooperation.
The agreement binds the companies to cooperation in the following fields:
• 
exploration, development, transportation, utilization and retailing of natural gas, oil and other energy carriers;
• 
designing, construction, operation and servicing of oil and gas pipelines, storage facilities and distribution pipeline network;
• 
diagnostics and control for technical state and safety of oil and gas pipelines as well as other facilities of gas and petrochemical infrastructure;
• 
using of oil and gas as motor fuel, development and management of gas distribution systems and petrol stations’ network;
• 
refining of oil, gas and other hydrocarbons;
• 
supplying oil and gas refinery products and the required equipment to oil and gas industry of Vietnam.
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