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Vietnamese oil, gas and petrochemicals

Hydrocarbon Engineering,

Oil and gas

BMI has said that it has become increasingly bearish on Vietnam’s long term oil and gas production outlook, as new output and ongoing project expansions fail to offset severe decline at the country’s major producing fields.

Russia has been keen to increase its stake in Vietnam’s oil and gas sector. Gazprom Neft and Rosneft had originally been linked to the proposed expansion and modernisation of the Dung Quat refinery. Gazprom has also been given positions in the deepwater Phu Khanh basin and Rosneft is in talks for Chevron’s Stake in Block B, BMI has been led to believe. However the company has said that Russian investment plans in Vietnam’s up and downstream sectors face severe risks from the likelihood of growing sanctions on the firms and their growing inability to access western capital markets will also hit their ability to fulfil their commitments.

Total crude oil and liquids output will increase in the short term according to BMI, as new fields are brought online or are ramped up to peak production levels. However, this trend is expected to reverse from 2018, as declines in Bach Ho outpace new output gains.

BMI has also commented that oil and gas reserves could rise if new exploration gains momentum. However, the ongoing maritime boundary dispute with China suggests limited opportunity for offshore exploration within the coming years. Vietnam’s refining production is also set to rise from the construction of two new refineries. BMI has said that local Vietnamese media has reported that the construction of Vung Ro was due to start last year with the project coming online in 2017, however due to land clearance issues, the project has hit delays. It was also reported that the project has broken ground and the parent company is hopeful for construction to start this year.


Vietnam’s petrochemicals market continues to exhibit solid growth according to BMI. However, while the domestic producers struggle to keep pace due to capacity constraint, Vietnam relies heavily on imports and they company has warned of project delays and heightened competition from US producers in the medium term, which could increase costs and undermine competitiveness.

BMI has also commented that Vietnam is growing rapidly in terms of chemicals and derivatives. Limited capacity is leading to a reliance on imports for domestic conversion and end product manufacturing. Also, with refinery developments in the pipeline, Vietnam will be in a position to increase capacities, particularly for polypropylene and ethylene in the medium term. However, slow land clearance and financing problems delay these projects, postponing capacity increases by a number of years.

Aside from financing and land acquisition issues that have delayed refinery and petrochemicals projects in recent years, BMI has said that there is a danger of massive regional over supply that will push down prices in the long term. Externally, the industry is faced with the onslaught of cheap US based production flooding the Asian market, while it will be dependent on refineries for feedstock, which is likely to be more expensive than shale derived ethane.

Edited from report briefs by Claira Lloyd

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