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Home / Issue Archive / 2008 / June #6 / Vietgazprom: Tames China Sea Panther

№ 6 (June 2008)

Vietgazprom: Tames China Sea Panther

Today’s chasing after new hydrocarbon reserves is more and more actively moving seaward.

By Ivan Gogolev

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Vietgazprom: Tames China Sea Panther

Ivan Gogolev

Today’s chasing after new hydrocarbon reserves is more and more actively moving seaward.

In the environment of high oil prices, oil and gas producers do invest more in developing offshore fields all over the world. Leading the universal tendency, Russian companies employ fleet and actively explore northern and southern sees adjacent to Russia, with the most advanced ones reaching far abroad.
“Today, Gazprom’s change from the national champion into a leading global energy producer has come true, to say the least of it,” Alexei Miller, Chairman of the Board of this gas holding, said a day before the last year’s annual general meeting of stockholders. Actually it means that the goal set by the corporate management several years ago has been reached.
In this instance, a deserved recognition should be granted to Zarubezhneftegaz, which is quite successful in managing a number of Gazprom’s foreign projects, in particular, offshore projects in various parts of the world. In August of the previous year, Gazprom acquired a right to explore and develop its first offshore gas field located outside Russia, in Vietnam. Gas has been encountered in the Bao Wang (Gold Panther) area in the northern part of the South China Sea. In the future, Gazprom will be able to produce at least 10 bcm of gas annually and to sell it in Vietnam and China.
In practical terms, hydrocarbon exploration, production and marketing is realized by Vietgazprom, the Joint Operating Company (JOC) established in 2002 by Supervisory Company PetroVietnam representing the interests of Vietnam National Oil and Gas Corporation PetroVietnam and Zarubezhneftegaz (on behalf of Gazprom). The operation license has been issued for a period of 25 years. The JOC operates in accordance with Oil and Gas Contract for Block 112 Offshore the Socialist Republic of Vietnam (SRV). The contractual area is located in the Gulf of Bac Bo (the South China Sea).
According to survey data, gas inflow was rated at up to 400,000 cu. m per day with gas condensate found in the well stream. Gas was featured by high quality: according to specialists it was nearly pure methane.
Prime Minister of Vietnam Nguyen Tan Dzung during his visit to Moscow in September 2007 highly appreciated the results of joint activities by Zarubezhneftegaz and PetroVietnam.
In the long term, the field discovered may become a resource base for full scale development of relations between Russia and Vietnam in the energy sector per the Gas Industry Cooperation Agreement signed by heads of Gazprom and PetroVietnam in November 2006 during Russian President Putin’s visit to Hanoi.
Under the Agreement, partners intend to arrange a full scale cooperation to start with hydrocarbon production and end with hydrocarbon marketing. Companies make plans to cooperate in the area of exploration, production, transportation, utilization, and sales of natural gas, oil and other energy sources. In the future, it is planned to create an entire infrastructure for processing oil, gas and other hydrocarbon raw materials and for constructing oil and gas pipelines, storage facilities, and distribution pipeline systems. It is also intended to construct gas distribution and fuel station systems.
In addition, Gazprom and PetroVietnam will be engaged in supplies of hydrocarbon processing products and equipment for oil and gas industry. The companies also intend to join efforts for diagnostics and control of condition and safety of oil and gas pipelines and other gas and petrochemical infrastructure facilities. 
Per the document mentioned above, the parties also agreed on cooperation in promising projects to be implemented in third countries in the area of oil and gas field exploration and development. Finally, the companies plan to develop scientific and technological cooperation and to collaborate in the area of personnel professional improvement and training.
Alongside with that, the field discovery is only the start for full scale and long term offshore operations. According to Operations Deputy Director Victor Belogurov who headed Vietgazprom during several years, the company will continue working in two directions.
“On the one hand, we need to perform all operations connected with exploration of the field discovered: to drill exploratory wells, to delineate the field, and to estimate reserves. On the other hand, we need to perform our obligations connected with geologic exploration in the contractual area,” Belogurov says.
It is worth to mention that since the company’s projects are long-term and capital intensive, all of them consist of several stages. The geologic exploration program prepared in 2002 consists of three stages. This flexible approach is accepted in major international companies for it enables to amend the program at any point and to save funds. A similar practice is applied to all capital-intensive projects.
So, within the first stage of geologic exploration, it was planned to drill three exploratory wells in Block 112, but already after drilling the first well, Vietgazprom extended the contractual area by adding another section. For reduction of the project risks and minimization of costs for its further development, the company conducted offshore 3D seismic acquisition in the extended area of 800 sq. kilometers.
The acquisition data have been reviewed to define structures that are most perspective for drilling, namely Bao Dang and Bao Wang. In June 2007, the company drilled a prospect well in the Bao Dang structure, and already in August testing of a prospect well in Bao Wang resulted in commercial inflow of natural gas. The first geologic exploration stage has been completed after commissioning the well.
“For optimization of operations, Gazprom decided to combine the second and third stages of the geological exploration program. At present, within the second (combined) stage, we plan to conduct offshore 3D seismic acquisition in the Bao Wang field and the Bao Chang structure, and 2D seismic acquisition in the coastal area,” Belogurov says. He also mentions that it is planned to drill the second prospect well in the Bao Dang structure.
Exploration of the Bao Wang field will be conducted concurrently. Vietgazprom intends to extend the area of this field since the preliminary appraisal demonstrated that its boundaries outstretch beyond the boundaries of Block 112 licensed by the company.
The exploration plan provides for construction of six exploratory wells: three for each dome of the Bao Wang field. Initially, it is planned to drill the south dome with proved gas-bearing capacity.
Belogurov says that the Bao Wang field exploration plan was reviewed and approved at the meeting of the workshop for geologic exploration and reserves of hydrocarbon fields, hydro-mineral raw materials and other mineral resources at the Gas Industry Commission for Field Development and Subsoil Use.

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