Hong Kong: Vietnam - Legal Overview - Oil And Gas

Last Updated: 20 November 1995
Most Read Contributor in Hong Kong, October 2018
The laws of Vietnam are complex and new legislation is constantly being introduced. What follows is no more than an introductory overview that we hope will assist investors to decide which areas of law they will need to research further.

This summary is, necessarily, selective and is no substitute for detailed legal advice.

1. The Oil and Gas industry plays a vital role in the Vietnamese economy not least as the country's principal source of foreign exchange.

Exploitation of oil and gas reserves, however, requires high levels of capital investment and expertise. For these reasons, and particularly as a result of the decline in the availability of assistance from the old Soviet and Eastern blocs, it is an area which has, since 1988, been opened up to foreign investment.

2. Vietnam Oil and Gas Corporation ("PetroVietnam") came into being in 1975 as an "arm" of the Ministry of Heavy Industry and was responsible for State management and supervision of petroleum exploration and production, trading and refining.

It still maintains these functions today, but following Decision 330 TTG of 29 May 1995 it acquired the equivalent of Ministerial status, becoming an independent entity, responsible for its own activities. It is organised and operated according to its Statute which was issued together with Decree No 38 CP of 30 May 1995. This legislation details, amongst other matters, the rights and obligations of Petrovietnam, its management structure, the member units of the corporation, finances and its relationship with the State.

3. At present Vietnam has 3 producing oil fields; Bach Ho (White Tiger), developed in the mid 1980's by the Vietnamese/ Soviet Government Joint Venture. VietSovPetro; Rong (Dragon), and Dai Hung (Big Bear), which together produce around 170-180,000 barrels per day. Of these Bach Ho is the sole producer of gas in the form of associated gas. Presently, no non associated gas is produced, though significant reserves have been discovered, and are likely to be developed in the Nam Con Son Basin. Dai Hung is currently being operated by a consortium led by the Austi-alian company BHP, with both Rong and Bach Ho operated by VietSovPetro.

4. A number of other blocks are currently under appraisal by a variety of international oil companies, and it is believed that within the next 18 months to 2 years a clearer picture will emerge of the extent of the country's overall reserves, and whether or not Vietnam will ultimately rank as a major global producer.

5. The lifting of the US trade embargo in 1994 quickly brought the mzoor American players back into this field, a presence which seems likely to increase with the naturalisation of relations between the USA and Vietnam.

6. Since the oil and gas industry was opened up to foreign investment, all exploration contracts between Petrovietnam and foreign entities have been by way of Production Sharing Agreements (PSAs), a form of business co-operation contract prevalent throughout the oil industry. B y the end of 1994, some 28 had been entered into. The legislation governing oil and gas matters, the Petroleum Law of 6 July 1993, permits other forms of joint co-operation, but up until now the use of PSAs has, in practice, been mandatory in all cases.

However, in the recent round of bidding for Block 15- 1, it would appear that bidders for the first time were required to submit proposals both by way of PSA, and by way of joint venture. It is believed that this request has been motivated by a desire by PetroVietnam to obtain increased day to day involvement in the exploration process with a view to developing expertise in this area.

No decision has yet been made as to whom the licence for this block will be granted, and the ultimate format to be adopted remains to be determined.

7. The maximum duration of a petroleum contract, of whatever type, is 25 years, of which the Phase 1 exploration period must not exceed 5 years.

In deep water or remote areas this may be extended to 30 years with a maximum 7 year exploration period.

Extensions of up to 5 years may be permitted to the overall contract, with a 1 year extension to the exploration phase permitted. Gas related contracts may not exceed 30 years, with a maximum phase 1 period of 7 years. The same extensions apply.

8. Whatever the chosen vehicle, any petroleum contract. must provide (amongst other matters) for:-

- the duration of the contract;

- commitment on overall work programmes and financial investment;

- conditions applying in the event of early determination or extension of the contract;

- rights of parties to assign their interest in the contract;

- provisions enabling PetroVietnam to " back- in" to the development phase;

- recovery of capital investment, in particular exploration and development costs from future production;

- rights of PetroVietnam to fixed assets upon termination of the contract and recovery of capital investment;

- levels of tax and royalty payments;

- allocation of production after recovery of costs;

- training;

- environmental protection issues;

- dispute resolution.

9. In addition to the usual range of taxes applied to a foreign party to a Business Co-operation Contract, Royalties as a percentage of output are payable in respect of both crude oil and gas production.

The Petroleum Law stipulates a range of Royalties:-

- between 6% and 25% for crude oil; and

- between 0 % and 10% for natural gas.

The actual level in any contract will be a matter for negotiation depending upon the prevailing economic conditions and the production rate.

For gas contracts the absence at present of a gas market within Vietnam is of significance.

- profits tax of 50% is applied to the foreign party to a PSA. In practice no tax holidays or reductions in rates are permitted.

10. All data or information obtained by a foreign operator during the exploration phase, or indeed at all, belongs to the PetroVietnam.

11. At present the only gas produced is associated gas produced by the Bach Ho field, which is piped onshore and used for very limited power generation at Ba Ria, and will potentially form part of a project seeing the linking of PetroVietnam with Mitsui and British Gas in a wider project including a LPG treatment plant, LPG exports, storage, and pipelines to power plants which would buy the gas. A study on a 370 km transport and processing system for gas from the Nam Con Son basin, which will also co-ordinate the transportation needs of other producing fields, is currently under way.

12. The downstream petroleum industry is also presently in its early stages. Only one small refinery with a capacity of approximately 15,000 barrels per day is currently operational. A consortium headed by Total has been awarded the feasibility study to investigate the possibility of building and operating a refinery in Dung Quat Province. Indications are that the Government plan to construct another refinery with assistance from foreign investment.

13. A lack of refining capacity means that the vast bulk of the country's needs must be met by importing finished petroleum products, though there is limited blending of lubricants in 2 main blending plants, using imported base oil, carried out in joint venture operations with Petrolimex.

Aside from the above, foreign investment in lubricant and ancillary products is limited, in the main, to marketing and sales via joint venture agreements with local partners.

All distribution of fuel oils, petrol, diesel, and gasoline is carried out by State controlled enterprises, the largest of which is Petrolimex. No foreign involvement is presently permitted in this area.

NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

If you would like further advice please contact: David Ellis, Johnson Stokes & Master, 16th Floor, Princes Building, 10 Chater Road, Hong Kong; Tel 2843 4226; Fax no. : 2845 9121. Alternatively do a text search "Johnson Stokes and Master" and "Business Monitor".

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions