Russian-Backed Group Says Vietnam Oil Discovery Is Commercial

A company with Russian and Japanese investment said it made a commercial oil discovery off the Vietnamese coast, and plans to begin production as soon as 2009.

VRJ Petroleum Co., which includes Russia's OAO Zarubezhneft, Vietnam Oil & Gas Group, and a unit of Japan's Idemitsu Kosan Co., has drilled three exploration and appraisal wells on the Doi Moi structure, located on Block 9-3 about 135 kilometers (84 miles) off the coast of the port city of Vung Tau, according to a statement from the joint operating company.

The drilling proved the ``availability of oil'' in the area, located in water depths of about 50 meters, VRJ said. Production may start next year and may be sustained at a rate of between 15,000 barrels and 20,000 barrels per day, with the field operating for as long as 25 years, according to VRJ General Director Victor Anosov, who's based in Vung Tau.

``We can't say exactly yet about reserves, we have to prepare a development plan,'' Anosov said today by phone. ``We are optimistic, very optimistic about this field.''

Vietnam is Southeast Asia's third-biggest oil producer after Indonesia and Malaysia. Output fell for a third year in 2007, slipping 8 percent to about 15.5 million metric tons, the Vietnam News Agency reported Jan. 2, or about 318,000 barrels per day.

State-owned Zarubezhneft has a 50 percent stake in Block 9-3, with a unit of Vietnam Oil & Gas Group, known as PetroVietnam, taking 35 percent and a unit of Idemitsu Kosan holding 15 percent, according to a 2006 statement from the Japanese company.

Bach Ho Field

Zarubezhneft is also a partner with PetroVietnam in Vietsovpetro, which operates the Bach Ho field that is Vietnam's biggest and has been in operation for two decades.

Vietsovpetro, which Russian President Vladimir Putin described in October as ``one of the most economically effective oil-producing companies in the world,'' also operates the Rong field, which is in block 9-1 and is adjacent to VRJ's area.

Vietnam's Ministry of Industry said in August that exploration was taking place in the area of the Rong field -- which produced almost 18,000 barrels per day in the first half of 2007, according to Vietsovpetro -- in an attempt to maintain national production as Bach Ho's output slips.

The proximity to Rong means that ``we can work together with Vietsovpetro and use their infrastructure,'' said Anosov. The new field, to be named Nam Rong-Doi Moi, contains ``pure oil, no gas,'' he said.

The partners began seismic surveys in the area in 2002, saying then that total investment in the event of a commercial discovery may reach $1 billion.

``We have to hold a management committee meeting in May to discuss further exploration of the block,'' said Anosov. ``But for now we are focused on starting development of what we have already found.''