bmi vietnam oil and gas report q2 2014

Q2 2014www.businessmonitor.com

VIETNAMOIL & GAS REPORTINCLUDES 10-YEAR FORECASTS TO 2023

ISSN 1748-4375Published by:Business Monitor International

Vietnam Oil & Gas Report Q2 2014INCLUDES 10-YEAR FORECASTS TO 2023

Part of BMIs Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: February 2014

Business Monitor InternationalSenator House85 Queen Victoria StreetLondonEC4V 4ABUnited KingdomTel: +44 (0) 20 7248 0468Fax: +44 (0) 20 7248 0467Email: [email protected]: http://www.businessmonitor.com

2014 Business Monitor InternationalAll rights reserved.

All information contained in this publication iscopyrighted in the name of Business MonitorInternational, and as such no part of thispublication may be reproduced, repackaged,redistributed, resold in whole or in any part, or usedin any form or by any means graphic, electronic ormechanical, including photocopying, recording,taping, or by information storage or retrieval, or byany other means, without the express written consentof the publisher.

DISCLAIMERAll information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time ofpublishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business MonitorInternational accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of thepublication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind asto the accuracy or completeness of any information hereto contained.

CONTENTS

BMI Industry View ............................................................................................................... 7

SWOT .................................................................................................................................... 9

Industry Forecast .............................................................................................................. 10Table: Vietnam - Upstream Projects Database . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Oil And Gas Reserves ............................................................................................................................. 11Table: Vietnam Proven Oil & Gas Reserves And Total Petroleum Data, 2012-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Table: Vietnam Proven Oil & Gas Reserves And Total Petroleum Data, 2018-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Oil Supply And Demand .......................................................................................................................... 17Table: Vietnam Oil Production And Net Exports, 2012-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Table: Vietnam Oil Production And Net Exports, 2018-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Refining And Oil Products Trade .............................................................................................................. 22Table: Vietnam Refining - Production And Consumption, 2012-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Table: Vietnam Refining - Production And Consumption, 2018-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Gas Supply And Demand ......................................................................................................................... 26Table: Vietnam Gas Production, Consumption And Net Exports, 2012-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Table: Vietnam Gas Production, Consumption And Net Exports, 2018-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Revenues/Import Costs ............................................................................................................................ 31Key Risks To BMI's Forecast Scenario ....................................................................................................... 32

Industry Risk Reward Ratings .......................................................................................... 33Asia - Risk/Reward Ratings ....................................................................................................................... 33

Table: Asia's Oil & Gas Risk/Reward Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

The Upstream Leaders ............................................................................................................................ 34Resource-Rich Countries Hit By State Involvement ....................................................................................... 36

Table: Asia Upstream Sector Risk/Reward Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Downstream Support .............................................................................................................................. 38Table: Asia O&G Downstream Risk/Reward Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Vietnam - Risk/Reward Ratings .................................................................................................................. 43Vietnam Upstream Ratings - Rewards ........................................................................................................ 43Vietnam Upstream Ratings - Risks ............................................................................................................. 43Downstream Scores ................................................................................................................................ 43

Market Overview ............................................................................................................... 45Vietnam Energy Market Overview ............................................................................................................... 45Overview/State Role ............................................................................................................................... 46Licensing And Regulation ........................................................................................................................ 47Government Policy ................................................................................................................................. 50International Energy Relations ................................................................................................................. 50

Oil & Gas Infrastructure ........................................................................................................................... 52Oil Refineries ........................................................................................................................................ 52

Vietnam Oil & Gas Report Q2 2014

Business Monitor International Page 4

Table: Vietnam's Main Refineries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52Oil Storage Facilities .............................................................................................................................. 55LNG Import Terminal ............................................................................................................................. 56Gas Pipelines ........................................................................................................................................ 56

Competitive Landscape .................................................................................................... 59Competitive Landscape Summary .............................................................................................................. 59

Table: Key Players - Vietnam Oil And Gas Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60Table: Key Upstream Players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61Table: Key Downstream Players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Company Profile ................................................................................................................ 62PetroVietnam .......................................................................................................................................... 62Rosneft Vietnam ...................................................................................................................................... 68Petronas Vietnam .................................................................................................................................... 71Zarubezhneft/Vietsovpetro ......................................................................................................................... 74Other Summaries ..................................................................................................................................... 77

Regional Overview ............................................................................................................ 89Asia Overview ......................................................................................................................................... 89Gas Is Hot ............................................................................................................................................ 89Locking Eyes On Gas Production .............................................................................................................. 92Australia's LNG Roadblocks Open Up New Opportunities Elsewhere ............................................................... 93Asia Fights Against LNG Prices ................................................................................................................ 95Seeking An Unconventional Rescue ........................................................................................................... 98Coalbed Methane: Underrated Potential .................................................................................................. 101Refining Woes ..................................................................................................................................... 101

Global Industry Overview ................................................................................................ 105Global Energy Market Overview .............................................................................................................. 105

Appendix .......................................................................................................................... 113Asia - Regional Appendix ........................................................................................................................ 113

Table: Oil Consumption - Historical Data & Forecasts, 2011-2018 ('000b/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113Table: Oil Consumption - Long-Term Forecasts, 2015-2022 ('000b/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114Table: Oil Production - Historical Data & Forecasts, 2011-2018 ('000b/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114Table: Oil Production - Long-Term Forecasts, 2015-2022 ('000b/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115Table: Refining Capacity - Historical Data & Forecasts, 2011-2018 ('000b/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116Table: Refining Capacity - Long-Term Forecasts, 2015-2022 ('000b/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116Table: Gas Production - Historical Data & Forecasts, 2011-2018 (bcm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117Table: Gas Production - Long-Term Forecasts, 2015-2022 (bcm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118Table: Gas Consumption - Historical Data & Forecasts, 2011-2018 (bcm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119Table: Gas Consumption - Long-Term Forecasts, 2015-2022 (bcm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119Table: LNG Exports - Historical Data & Forecasts, 2011-2018 (bcm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120Table: Net LNG Exports - Long-Term Forecasts, 2015-2022 (bcm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

Vietnam - Refined Products Breakdown, 10-year Forecasts ........................................................................... 122Table: Vietnam Refined Petroleum Products, Production Breakdown, 2012-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122Table: Vietnam Refined Petroleum Products, Production Breakdown, 2018-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123



Table: Vietnam Refined Petroleum Products, Consumption Breakdown, 2012-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124Table: Vietnam Refined Petroleum Products, Consumption Breakdown, 2018-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125Table: Vietnam Refined Petroleum Production, Net Exports Breakdown, 2012-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126Table: Vietnam Refined Petroleum Production, Net Exports Breakdown, 2018-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

Glossary ........................................................................................................................... 129Table: Glossary Of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

Methodology .................................................................................................................... 131Industry Forecast Methodology .............................................................................................................. 131Source ............................................................................................................................................... 133Risk/Reward Ratings Methodology .......................................................................................................... 133

Table: Bmi's Oil & Gas Upstream Risk/Reward Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135Table: Weighting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137



BMI Industry View

BMI View: Oil production is set for robust growth in the short-term, as new projects are brought online orramped up to peak production levels. However, after peaking in 2016, we forecast output to fall, as new

discoveries are insufficient to offset declining volumes from the flagship Bach Ho field. New developments

have the potential to boost long-term gas production, but we note that stalled progress on the Block B

project could dampen the country's mid-term gas production outlook.

The main trends and developments for Vietnam's oil and gas sector are:

Total crude oil and liquids output will rise in the short term as new fields are brought online or areramped up to peak production levels. This could push production up from an estimate of 377,450 barrelsper day (b/d) in 2013 to 426,170b/d by 2016. However, this spell will end in 2017 unless further fieldsare developed. BMI therefore expects production to decline from its 2016 peak to 373,560b/d by 2023.

Economic growth - expected to average at 6.7% over our 10-year forecast period to 2023 - will continueto drive oil and gas consumption in Vietnam higher over the next decade. However, BMI's Country Riskteam holds the view that Vietnam's costly welfare subsidies will need to be gradually withdrawn as partof the government's broader efforts to fix its fiscal imbalances and as such, we expect further price hikesto come. This has led us to moderate our forecasts for Vietnam's oil consumption growth rate. We expecttotal refined oil products consumption (previously referred to as total oil consumption) to rise at a slowerrate from an estimate of 389,160b/d in 2013 to 459,970/d in 2018 and 533,230b/d by 2023.

BMI estimates gas production will rise from an estimated 12.04bn cubic metres (bcm) in 2013 to14.06bcm by 2018. However, we flag Chevron's exit from the major Block B project as indication of theongoing challenges facing investors in the country's gas sector. Although several companies haveexpressed interest in the project, unless Vietnam can offer more attractive gas pricing terms, progress onthe block's development may be stilted. Gas demand will outstrip supply from 2015, with up to 0.7bcm ofnet imports expected in that year. By 2023, net imports of gas could hit as much as 5.8bcm, all in theform of liquefied natural gas (LNG).

Oil and gas reserves could rise if new exploration gathers pace. However, ongoing risks from vigorousChinese opposition to drilling in the disputed South China Sea could delay exploration. Therefore, for2014 we have kept our oil reserves forecasts unchanged at 4.4bn barrels (bbl). However, Vietnam couldstill find it difficult to reverse a longer-term decline in reserves as production ramps up to meet risingdomestic needs faster than discoveries are made to replace reserves. By end-2023, we expect proven oilreserves to have fallen to 4.2bn barrels (bbl).

Rising interest in gas exploration and the number of encouraging finds to date suggests that in the short-to medium-term Vietnam's gas reserves are poised for an increase. We estimate that gas reserves willcontinue to rise from 699bcm at the start of 2013 to about 702.4bcm in 2017. It could start dippingtowards the end of our forecast period to 616.5bcm, though we acknowledge significant upside risks fromfurther offshore and unconventional exploration.

Vietnam's refining production is set for a rise from the construction of two newbuild refineries - NghiSon and Vung Ro. Its refining capacity could increase from 140,000b/d in 2013 to 450,000b/d by 2018,rising further still to 500,700b/d by the end of our forecast period when these refineries fully enteroperation. There is significant upside risk to this forecast, if four other proposed projects are brought intofruition.



Vietnam's refinery developments will preserve valuable light sweet domestic crudes for export, whileallowing for the processing of cheaper heavier foreign grades for domestic consumption.

At the time of writing we assumed an OPEC basket oil price for 2014 of US$101.80 per barrel (bbl), fallingto US$100/bbl in 2015. Global GDP in 2014 is forecast at 3.1%, up from an assumed 2.6% in 2012. For2015, growth is estimated at 3.3%.



SWOT

Vietnam Oil And Gas SWOT

Strengths Good maritime links with other Asian markets.

Relatively open to foreign investment.

Growing market.

Weaknesses Oil production set for longer-term decline towards the tail-end of our forecast period

without big discoveries.

Room for improvement for support services. Prevalence of counterfeit and low quality

fuel products in the retail sector.

Relative difficulty in obtaining information about rules and regulations.

Opportunities Rapid economic growth presents some downstream potential.

Underexplored offshore territory beyond the Cuu Long basin.

Upstream gas potential.

Lack of midstream infrastructure presents investment opportunities.

Threats Tension with China over territory in the South China Sea makes exploration in the

region more difficult, particularly for companies looking to develop Chinese assets. It

will compromise the country's long-term exploration potential.

Efforts to boost production of oil and gas may push regulators to threaten foreign oil

companies with production sharing contract (PSC) revisions and cancellations unless

they increase output.

Market risk if a banking crisis breaks out in the country.



Industry Forecast

Table: Vietnam - Upstream Projects Database

Name Field Name Companies Type ofProject

Status Est. PeakOil/Liquids

Output, (b/d)

Est. PeakGas

Output, (bcm)

Onshore/Offshore

Chim Sao Chim Sao Premier* (53.125%), Santos(31.875%), PVEP (15%)

Oil andgas

Producing 25,000 0.256 Offshore

Lac DaNau

Lac Da Nau PetroVietnam* (40%), Total(35%), SK Energy (25%)

Oil Discovery na na Offshore

Ca NguVang

Ca Ngu Vang PetroVietnam* (50%), PTTEP(25%), SOCO International(25%)

Oil andgas

Producing 20,000 11 Offshore

Dai Hung Dai Hung PetroVietnam PVEP* (50%),Vietnam Oil and Gas Group(50%)

Oil Producing 11,600 na Offshore

WhiteTiger

Bach Ho Vietsovpetro (PetroVietnam,Zarubezhneft)

Oil Producing 170,000 na Offshore

Cuu Long(Block15-1)

Su Tu Den, SuTu Vang, SuTu DenNortheast, SuTu Trang, SuTu Nau

PetroVietnam (50.0%), Perenco(23.3%), KNOC (14.2%), SKCorp. (9.0%), Geopetrol (3.5%)

Oil Development(Ongoing)

66,000 0.460+ Offshore

Block15-2/01

Hai Su Trang,Hai Su Den

PetroVietnam* (40%), Talisman*(60%)

Oil Development 35,000 na Onshore

Dua Dua Premier Oil (53.13%), Santos(31.875%). PetroVietnam (15%)

Oil Development 10,000 na Offshore

Vietnam16-1Phase II

Ngna O, VoiTrang, VoiVang

Hoang Long Joint OperatingCompany - PTTEP (28.5%),PetroVietnam (41%), SOCO(28.5%), OPECO (2%)

Oil andgas


Block 9-2 Ca Ngu Vang,Ca Ong Doi

PetroVietnam (50%), PTTEP(25%), SOCO (25%)

Oil andgas


Block 15-2 Rang Dong,Phuong Dong

Japan Vietnam PetroleumCorporation* (46.5%), Perenco(36%), PetroVietnam (17.5%)

Oil andgas

Development(EOR)

16,200 na Offshore

Block 06.1 Lan Do TNK-BP* (35%), ONGC Videsh(45%), PetroVietnam (20%)

Gas Producing na 2 Offshore

Block 11-2 Rong Doi,Rong Doi Tay

KNOC* (39.75%) Gas Producing na 1.61 Offshore

Blocks102 & 106

Ham Rong,Thai Binh

Petronas (50%), PetroVietnam(20%), Singapore PetroleumCompany (10%), ATI Petroleum(20%)

Oil andgas

Development 10,000 na Offshore

Con SonJOC

Gau Chua,Gau Ngua, CaCho

Con Son Joint OperatingCompany - Petronas,PetroVietnam




Vietnam - Upstream Projects Database - Continued

Name Field Name Companies Type ofProject

Status Est. PeakOil/Liquids

Output, (b/d)

Est. PeakGas

Output, (bcm)

Onshore/Offshore

Lam SonJOC

Thang Long,Dong Do, HoXam South

Lam Son Joint OperatingCompany - PetroVietnam,Petronas


HST/HSD Hai Su Trang,Hai Su Den

Talisman Oil Development 15,000 na Offshore

Song Doc Song Doc Petrovietnam PVEP Oil Producing 25,000 na Offshore

Block B Block B Chevron (42.4%), Moeco(25.6%), PetroVietnam (23.5%),PTTEP (8.5%)

Gas Planned na na Offshore

NB * = operator; na = not available. Source: Company data, Reuters, Bloomberg, Oil & Gas Journal, BMI

Oil And Gas Reserves

Table: Vietnam Proven Oil & Gas Reserves And Total Petroleum Data, 2012-2017

2012 2013e 2014f 2015f 2016f 2017f

Proven Oil Reserves bbl bn 4.4 4.4 4.4 4.4 4.4 4.4

Proven Oil Reserves bbl mn 4,400.0 4,400.0 4,417.7 4,419.8 4,418.6 4,408.7

Proven Oil Reserves % change y-o-y 633.3 0.0 0.4 0.0 0.0 -0.2

Reserves to production ratio (RPR), years 33.6 31.9 30.1 29.0 28.4 28.6

Natural Gas Proven Reserves, tcm 0.7 0.7 0.7 0.7 0.7 0.7

Natural Gas Proven Reserves, bcm 699.4 699.4 687.0 693.9 695.5 702.4

Natural Gas Proven Reserves, % change y-o-y 263.2 0.0 -1.8 1.0 0.2 1.0

Natural Gas Reserve to Production Ratio, years 75.2 58.1 56.1 53.0 51.8 53.9

Hydrocarbons Production, Consumption and NetExports

Total Hydrocarbons Production, 000boe/d 523.8 589.4 617.5 647.0 662.3 652.3

Total Hydrocarbons Production, 000boe/d, % changey-o-y 14.7 12.5 4.8 4.8 2.4 -1.5

Total Hydrocarbons Production, US$bn 20.1 21.5 21.8 22.4 22.8 22.5

Total Hydrocarbons Production, US$, % change y-o-y 16.2 7.0 1.5 2.9 1.8 -1.6

Total Hydrocarbons Consumption, 000boe/d 536.2 596.6 611.9 652.2 678.2 692.9

Total Hydrocarbons Consumption, 000boe/d, %change y-o-y 10.6 11.3 2.6 6.6 4.0 2.2

Total Hydrocarbons Consumption, US$bn 22.6 23.6 23.8 24.8 25.3 25.4



Vietnam Proven Oil & Gas Reserves And Total Petroleum Data, 2012-2017 - Continued

2012 2013e 2014f 2015f 2016f 2017f

Total Hydrocarbons Consumption, US$, % change y-o-y 11.9 4.4 0.6 4.5 2.1 0.4

Total Net Hydrocarbons Exports, 000boe/d -12.5 -7.2 5.6 -5.2 -15.8 -40.6

Total Net Hydrocarbons Exports, 000boe/d, change y-o-y -56.1 -41.9 -176.9 -193.1 205.7 156.0

Total Net Hydrocarbons Exports, US$bn -1.5 -1.1 -0.9 -1.3 -1.4 -1.9

Total Net Hydrocarbons Exports, US$, % change y-o-y -24.5 -25.2 -19.7 44.8 7.0 32.7

Total Net Hydrocarbons Exports, US$mn at US$50/bbl, US$bn -0.6 -0.4 -0.3 -0.6 -0.6 -0.9


e/f = estimate/forecast. Source: EIA, BMI

Table: Vietnam Proven Oil & Gas Reserves And Total Petroleum Data, 2018-2023

2018f 2019f 2020f 2021f 2022f 2023f

Proven Oil Reserves bbl bn 4.4 4.4 4.3 4.2 4.2 4.2

Proven Oil Reserves bbl mn 4,410.5 4,386.3 4,325.9 4,249.6 4,247.7 4,175.7

Proven Oil Reserves % change y-o-y 0.0 -0.5 -1.4 -1.8 0.0 -1.7

Reserves to production ratio (RPR), years 28.9 29.5 29.9 30.2 31.2 30.6

Natural Gas Proven Reserves, tcm 0.7 0.7 0.7 0.7 0.6 0.6

Natural Gas Proven Reserves, bcm 696.2 688.2 669.7 654.2 631.6 616.5

Natural Gas Proven Reserves, % change y-o-y -0.9 -1.1 -2.7 -2.3 -3.5 -2.4

Natural Gas Reserve to Production Ratio, years 49.5 43.4 40.8 40.3 39.8 38.8

Hydrocarbons Production, Consumption and NetExports

Total Hydrocarbons Production, 000boe/d 665.2 684.9 684.4 670.1 652.1 652.1

Total Hydrocarbons Production, 000boe/d, % changey-o-y 2.0 3.0 -0.1 -2.1 -2.7 0.0

Total Hydrocarbons Production, US$bn 22.8 23.5 23.5 23.0 22.4 22.6

Total Hydrocarbons Production, US$, % change y-o-y 1.5 3.0 0.0 -2.0 -2.5 0.8

Total Hydrocarbons Consumption, 000boe/d 745.3 798.6 842.6 873.4 886.3 901.9

Total Hydrocarbons Consumption, 000boe/d, %change y-o-y 7.6 7.2 5.5 3.7 1.5 1.8



Vietnam Proven Oil & Gas Reserves And Total Petroleum Data, 2018-2023 - Continued

2018f 2019f 2020f 2021f 2022f 2023f

Total Hydrocarbons Consumption, US$bn 26.4 28.0 29.4 30.5 29.8 31.8

Total Hydrocarbons Consumption, US$, % change y-o-y 3.7 6.3 5.0 3.5 -2.2 6.9

Total Net Hydrocarbons Exports, 000boe/d -80.1 -113.7 -158.3 -203.3 -234.2 -249.7

Total Net Hydrocarbons Exports, 000boe/d, changey-o-y 97.5 41.9 39.2 28.5 15.2 6.6

Total Net Hydrocarbons Exports, US$bn -2.5 -3.5 -4.8 -6.3 -7.4 -8.0

Total Net Hydrocarbons Exports, US$, % change y-o-y 33.3 37.3 39.7 30.6 17.4 8.2




The bulk of Vietnam's oil and gas reserves are located offshore in the Cuu Long and Nam Con Son basins.

The EIA has dramatically revised its estimates of proven oil reserves in Vietnam, from 600mn barrels

(bbl) at end-2011 to 4.4bn bbl at end-2012, and gas reserves from 195.6bn cubic metre (bcm) in end-2011 to699.43bcm in end-2012. PetroVietnam expects to find up to 110mn barrels of oil equivalent (boe) between2011 and 2015, with partner companies such as Soco International and Premier Oil set to make useful

contributions through recent oil finds.

Ongoing Exploration

Notable exploration efforts include:

Santos: The Australian company has a 65% operated interest in shallow water Block 13-03 offshore inthe Nam Con Son Basin. Following the acquisition of seismic survey data in 2012, Santos is planning tospud an exploration well in 2014, testing the Hon Khoai oil prospect. The well is targeting meanprospective resources of between 50 and 100 barrels of oil equivalent (boe). The company also has a 50%operated interest in Block 123 in the Phu Khanh Basin. Following a non-commercial oil discovery fromits first exploration well in 2011, the company has completed a 564 km2 3D seismic survey and islooking to spud a second exploration well in 2014.

Murphy Oil: The US independent has taken a 20% working interest in Santos'Block 13-03. This is inaddition to the 60% stake it has in Block 11-2, which it is currently reviewing seismic data for with aneye to drill in early 2015. It is also looking to conduct a seismic survey for deepwater blocks 144 and 145in 2014. Pan Pacific Petroleum: Its exploration campaign in Block 07-03 has yielded results from adiscovery called Red Emperor. Flow testing was conducted in the CRD-3X appraisal well and returned a



flow rate of around 8,000b/d. The operator, Talisman, is currently assessing the commercial viability ofthe project and progression to a detailed front end engineering design phase is expected by Q414, pendingresults of the assessment. A further exploration well was spudded in January 2014, to evaluate theresource potential of the Silver Sillago prospect, located 55km to the west of Ca Rong Do and sharingsimilar geologic characteristics; a discovery here would add further upside to the block's prospectivity.

Talisman: The Canadian firm is planning to drill two key exploration wells in 2014, in Blocks 135 and136 in the Nam Con Son basin. The first, in Block 136, is targeting an extension of the Ca Rong Doprospect in Block 07-03; the second prospect, Vung May, straddles both Blocks 135 and 136.

Recent discoveries in Vietnam will likely help support current oil reserves levels. In July 2012,

Vietsovpetro announced that it had discovered a new source of oil at the Tho Trang (White Hare) field,which is located in Block 09-1 north west of Vietnam's largest oil field Bach Ho. Vietsovpetro revealed that

the well THT-1X flowed 1,690 barrels of oil per day (b/d). Further drilling at four other potential sites at thewell could push this figure higher. A further well THT-2X was to be spudded to enable the Vietnamese-

Russian joint venture (JV) to determine a development plan for the field. In January 2013, the joint venture(JV) also targeted drilling at Block 09-3, where the Bach Ho field lies, and in Block 04-3. Perenco, theFrench company which had acquired ConocoPhillips' assets in Vietnam, has also found exploration success

at well SV-6X in Block 15-1 in the Cuu Long Basin. Drill stem testing (DST) has seen the well flow over10,000b/d and the firm plans to fast-track its development. This will add to Vietnam's proven oil reserves

when development is completed (targeted for 2014).

Another massive discovery near an existing production site is Soco International's TGT-10XST1 well in the

producing Te Giac Trang (TGT) field. The independent announced in October 2013 that the well flowedmore than 27,000boe/d, with resource estimate of 150-200mn bbl - or up to 4% of its existing oil reserves.

These additions are a positive sign and will help Vietnam maintain its current level of oil reserves of about

4.4bn bbl through to 2018. However, Vietnam could still find it difficult to reverse a longer-term decline in

reserves as production ramps up to meet rising domestic needs faster than discoveries are made to replace

reserves. By end-2023, we expect proven oil reserves to have fallen to 4.2bn bbl.

Gas Reserves

Gas exploration, particularly in offshore northern basins, is still in its early stages. An initial appraisal of

new discoveries in the Phu Khanh and Song Hong basins points to potentially significant gas reserves

growth. ExxonMobil's Phu Khanh find (Ca Voi Xanh 2X, block 118) could be the most promising to date.The third well, Ca Voi Xanh-3X drilled in Q212, has also hit hydrocarbons, though the total size of thediscovery has yet to be made public. In February 2014, ExxonMobil announced that they had contracted a



semi-submersible rig to begin appraisal drilling there. The discovery is another indication of the region's

resource potential following previous discoveries by Premier Oil, Total and Petronas.

Rising interest in gas exploration and the number of encouraging finds to date suggests that in the short- to

medium-term Vietnam's gas reserves are poised for an increase as companies develop gas resources and

book them as reserves.

A Japanese consortium consisting of Idemitsu, JX Nippon and Inpex confirmed a gas discovery made inBlocks 05-1b and 05-1c in the Nam Con Son basin, and the find was backed by drill stem tests that

determined 'accumulations of gas and condensate', according to the official statement. The venture partners

will further appraise the well to evaluate its reserves potential and to identify other targets in the blocks.

These blocks lie north of Gazprom's blocks 05-2 and 05-3, which contain the Moc Tinh and Hai Thach gas

fields, which recorded first gas flow in August 2013.

Italian oil major Eni has also been active in offshore exploration, after farming into Block 105 in the SongHong basin and Block 120 in the Phu Khanh basin in the Gulf of Tonkin, in July 2012. However, in

December 2013, Eni's JV partner Kris Energy announced the completion of drilling and testing at first its

first exploration well in Block 120, Cua Lo-1. The well had been plugged and abandoned, after

encountering non-commercial volumes of oil and gas. In January 2014, an announcement was made that the

Ca Ngu-1 well, the first exploration well in Block 105, had also been plugged and abandoned; this time due

to poor deliverability and high carbon dioxide content. However, the company says it has identified other

oil and gas prospects within the block, and is looking towards further exploration Eni also has an interest in

Block 114, which is also located in the Song Hong basin and is estimated to hold 28bcm of gas.

We estimate that gas reserves will continue to rise to about 702.4bcm in 2017. It could start dipping towards

the end of our forecast period to 631.6bcm in 2023, though we acknowledge significant upside risks.

Methane Hydrates

Upside potential rests in Vietnam's unconventional potential, which the country is starting to look into.

Following Japan's methane hydrates breakthrough in March 2013, Vietnam has joined China in acceleratingefforts to search methane hydrates in the South China Sea. Vu Truong Son, director of the Centre of

Geology and Sea Mineral Resources at Vietnam's Ministry of Natural Resources, is optimistic that there are

'adequate conditions' for methane hydrates in its claimed portion of the South China Sea. Basins with

potential include Song Hong, Phu Khanh, Nam Con Son, Hoang Sa and Truong Sa. According to the US



Geological Survey, the Vietnamese portion of the South China Sea is fifth in Asia in terms of methane

hydrates potential.

While methane hydrates exploration are in a very early stage and will not yield commercial results within

our forecast period, a closer look at its tight oil and gas resources could. In February 2013, Eni signed a

memorandum of understanding (MoU) with PetroVietnam to explore the country's coal-bed methane andshale oil potential. Details of this collaboration are scarce, but this could yield results within the decade

given that technology and understanding of these are more advanced than that in methane hydrates.

South China Sea Dispute

A major downside risk to our forecasts comes from Vietnam's ongoing feud with China over territorialrights to the South China Sea, parts of which Vietnam deems as the Vietnamese East Sea. Chinese

opposition to exploration in disputed areas of the South China Sea will also limit Vietnam's long-term

reserves growth.

The two nations have been at loggerheads in recent years over maritime borders and in May 2011 the

dispute actually interrupted exploration when Chinese ships allegedly entered Vietnamese waters. China's

June 2012 offshore licensing round has inflamed the situation further. Vietnamese officials allege that a

number of the blocks on offer are within Vietnamese territory. In December 2012, China flatly told Vietnam

to stop unilateral oil exploration in the contested areas in the South China Sea. China could similarly choose

to assert its dominance in Vietnam as it had with the Philippines; the Philippines' offshore exploration in

contested waters had resulted in the sending of naval ships by China in order to coerce its smaller

neighbour.

We have already taken this into account in our cautious forecasts of the country's oil and gas reserves, but

also see the risk that an intensification of this dispute will present further downside risks, particularly for oil.

We could therefore see the risk of increasing Chinese intervention which could in turn disrupt Vietnam's

upstream aspirations.



Oil Supply And Demand

Table: Vietnam Oil Production And Net Exports, 2012-2017

2012 2013e 2014f 2015f 2016f 2017f

Crude Oil, NGPL, and Other Liquids Production,000b/d 359.1 377.4 401.9 417.1 426.2 422.9

Crude Oil, NGPL, and Other Liquid Production, %change y-o-y 12.5 5.1 6.5 3.8 2.2 -0.8

Crude and Other Liquids Production, mn bbl/year 131.1 137.8 146.7 152.2 155.6 154.4

Crude and Other Liquids Production, US$bn 14.4 14.6 14.9 15.2 15.4 15.0

Crude and Other Liquids Production, US$bn % changey-o-y 14.6 1.7 2.3 2.0 1.2 -2.8

Crude and Other Liquids Production, US$bn at US$50/bbl 6.6 6.9 7.3 7.6 7.8 7.7



Crude and Other Liquids Net Exports, 000b/d 226.9 244.6 268.5 283.4 252.3 162.1

Crude and Other Liquids Net Exports, % change y-o-y 20.9 7.8 9.7 5.6 -11.0 -35.8

Crude and Other Liquids Net Exports, US$bn 9.1 9.5 10.0 10.3 9.1 5.7

Crude and Other Liquids Net Exports, US$bn %change y-o-y 23.2 4.3 5.4 3.7 -11.8 -37.0

Crude and Other Liquids Net Exports, US$bn at US$50/bbl 4.1 4.5 4.9 5.2 4.6 3.0






Table: Vietnam Oil Production And Net Exports, 2018-2023

2018f 2019f 2020f 2021f 2022f 2023f

Crude Oil, NGPL, and Other Liquids Production, 000b/d 418.0 406.9 396.8 385.2 373.6 373.6

Crude Oil, NGPL, and Other Liquid Production, % change y-o-y -1.1 -2.7 -2.5 -2.9 -3.0 0.0

Crude and Other Liquids Production, mn bbl/year 152.6 148.5 144.8 140.6 136.3 136.3

Crude and Other Liquids Production, US$bn 14.6 14.3 13.9 13.5 13.1 13.1

Crude and Other Liquids Production, US$bn % change y-o-y -2.2 -2.7 -2.5 -2.9 -3.0 0.0




Crude and Other Liquids Net Exports, 000b/d 26.9 -43.0 -75.5 -88.1 -100.7 -101.6

Crude and Other Liquids Net Exports, % change y-o-y -83.4 -260.0 75.7 16.7 14.3 0.9

Crude and Other Liquids Net Exports, US$bn 0.9 -1.5 -2.6 -3.1 -3.5 -3.6

Crude and Other Liquids Net Exports, US$bn % change y-o-y -83.6 -260.0 75.7 16.7 14.3 0.9

Crude and Other Liquids Net Exports, US$bn at US$50/bbl 0.5 -0.8 -1.4 -1.6 -1.8 -1.9






Vietnam Oil Production, Consumption & Net Import Requirement

2001-2023


According to the EIA, total crude and liquids production in Vietnam rose rapidly to a peak of 403,000b/d in

2004, as the country's giant Bach Ho field drove output growth. Since then, volumes have gradually

declined as recovery rates from Bach Ho fell dramatically.

However, it appears that this trend has experienced a reverse. For 2012, state-owned PetroVietnam - which

has interests in all producing fields in Vietnam - reported that crude oil production rose 9.8% year-on-

year (y-o-y) to 16.7mn tonnes, or about 335,370b/d. The EIA has an even higher estimate of 347,062b/d forcrude oil and lease condensate production. When natural gas liquids (NGL) and other liquids are taken intoaccount, total liquids output for Vietnam rose from 319,120b/d in 2011 to 359,606b/d in 2012. Fields

contributing to this growth include production from Perenco's Su Tu Trang field in Block 15-1, Premier

Oil's Chim Sao in Block 12W and a ramp up of production from Hoang Long Joint Operating Company'sTe Giac Trang in Block 16-01.

We anticipate that output will continue to rise in the short term as new fields are developed. Output growth

continued throughout 2013, and total liquids production reaching an estimated 377,450b/d. Talisman's Hai



Su Trang and Hai Su Den (HST/HSD) development saw first production in May 2013 and Talisman and itsjoint venture partner Petrovietnam are currently in the process of ramping-up output at the field, targetingproduction of 15,000b/d. Gazprom's Moc Tinh and Hai thach gas condensate fields also began producing in

August 2013, with output set to peak in 2016 at 25,000b/d.

In 2014, oil production has been restored at the Chim Sao field. Production levels had been lowered in

August 2013 during repairs to the subsea gas export pipeline to reduce gas flaring; output fell from 25,500b/

d to 20,245b/d. In November 2013, Premier Oil announced that the rig for the Dua project was undergoingfinal commissing and due to drill a minimum of three development wells at the Dua field, Block 12W, Nam

Con Son Basin. The wells are targeting a gross production rate of 8,000b/d in the first year, to be tied back

to the Chim Sao field. Lam Son Joint Operating Company's Thang Long and Dong Do fields werescheduled to flow first oil in October 2013, but at the time of writing there was no indication that production

had started at either field. The development of Petronas' Gau Chua and Ca Cho discoveries in Blocks 10 and

11-1 has also reportedly been put on hold, pending a further evaluation of its economics. We have factored

this into our growth estimates for 2014 accordingly, and recognise that abandonment of the Gau Chua-Ca

Cho project would pose a minor downside risk to our mid- to long-term oil production forecast; potentialproduction for the two fields was projected at between 8,000 and 10,000b/d.

Cuu Long Joint Operating Company's Su Tu Nau field, Block 15-1, is moving forward in itsdevelopment. In December 2013, PetroVietnam Technical Services Corporation was a awarded the contract

to build and install two wellhead platforms at the field. Oil reserves are estimated at 120mn bbl, with a

targeted production rate of 50,000b/d. First oil is expected in Q414.

Several projects are also underway to boost production at existing fields. In November 2013, theVietnamese government granted a five year extension to the production sharing contract (PSC) for the RangDong, Block 15-2, Cuu Long Basin, from 2020-2025. Operator JX Nippon Oil & Gas ExplorationCorporation (JX NOEX) is looking to initiate an enhanced oil recovery (EOR) campaign at the field. It thesame month, it was also reported that Hoang Long Joint Operating Company were looking to developinga satellite project at the Te Chia Trang field, Block 16-1. Following positive results from DST at theTGT-10X well, the company is looking to put a new platform in place, to tie into the project over the next18-24 months. First oil is targeted for September 2015, pending government project approval.

Other projects that are expected to add to Vietnam's oil production between 2014 and 2016 are thecompletion of Phase II of Block 16-01 and Petronas' Ham Rongproject, Blocks 102 and 106.



While Vietnam's Indian summer with regard to production growth is encouraging, this spell could end in

2017 unless further fields are developed. Its flagship Bach Ho field is fast drying and maintaining recovery

rates is proving difficult for operator Vietsovpetro. New fields will struggle to mitigate this lost output

beyond 2017 even if new wells are drilled on the fringes of Bach Ho. BMI therefore expects production to

decline from its 2016 peak of 426,170b/d to 373,560b/d in 2023.

Consumption Hike

Total refined oil product consumption (previously referred to as oil consumption) came in at about376,000b/d in 2012, according to the EIA, a lower y-o-y increase than in 2011. This could be partly due to

the effects of a 4.3% hike in fuel prices announced by Petrolimex, Vietnam's largest fuels importer and

distributor, on August 1 2012. Such price hikes come after the government enacted legislation, originally

passed in 2009, that allows fuel distributors more freedom to set sales prices independently. The move stops

well short of a full market liberalisation, but allows retailers to react more quickly to changes in global

prices in the form of price revisions.

In December 2013, the Ministry of Finance issued a permit allowing wholesalers to raise the prices of

gasoline, kerosene and diesel by VND584, VND384 and VND635 per litre respectively. This was the fifth

time fuel prices had been raised in 2013, alternating with six price decreases. The decision was taken in

response to the growing fiscal burden posed by the fuel subsidies that are on offer to market actors in

compensation for the low prices they are paid for their products. According to the Ministry of Finance, as of

December 2013, domestic retail prices for fuel were on average VND914-1,414 per litre cheaper than

international market prices.

However, BMI's Country Risk team holds the view that Vietnam's costly subsidies will need to be gradually

withdrawn as part of the government's broader efforts to fix its fiscal imbalances and as such, we expect

further price hikes to come, even if global crude prices were to stabilise at current levels.

Strong economic performance will continue to drive oil consumption in Vietnam over the decade. BMI's

latest macroeconomic forecasts currently point to average real GDP growth of 6.7% between 2013 and

2023. Although the Vietnamese power sector's demand for oil is expected to shrink over the decade, oil

inputs into the manufacturing sector and strong vehicle growth will more than compensate. Our Autos team

expects annual vehicle sales rates to more than double over the next five years, rising from 93,093 in 2013,

to 140,845 in 2018, with passenger cars making up a bulk of the domestic autos market. Greater use of oil-

fuelled vehicle will support consumption growth in one of the fastest growing emerging markets in the



world. Nonetheless, we have tapered down our expectations for oil demand growth, as the transport sector

in particular could see a reduction in fuel demand in response to higher fuel prices that we expect as

subsidies wind down.

Thus, we expect total oil consumption to rise at a slower rate than our previous forecast from 389,200b/d in

2013 to 444,400b/d in 2017 and 533,200b/d by 2023. The impact of further price liberalisation - leading to

higher fuel prices and reducing the rate of demand growth - has already been accounted for in our forecasts.

Downside risks could come from increased fuel efficiency and a switch from oil to gas, particularly that in

the transport and manufacturing sector, though population growth and economic expansion will likely

negate some of these effects. Moreover, Vietnam's limited gas output and the lack of gas import facilities

will limit gas' gains over oil in the short-term.

Refining And Oil Products Trade

Table: Vietnam Refining - Production And Consumption, 2012-2017

2012 2013e 2014f 2015f 2016f 2017f

Crude Oil Refining Capacity, 000b/d 140.0 140.0 140.0 140.0 190.0 345.0

Crude Oil Refining Capacity, % change y-o-y 0.0 0.0 0.0 0.0 35.7 81.6

Crude Oil Refining Capacity, Utilisation, % 94.4 94.9 95.3 95.5 91.5 75.6

Refined Petroleum Products Production, 000b/d 132.1 132.8 133.5 133.7 173.9 260.8

Refined Petroleum Products Production, % change y-o-y 0.5 0.5 0.5 0.2 30.0 50.0

Refined Products Consumption, 000b/d* 376.0 389.2 400.8 414.9 429.4 444.4

Refined Products Consumption, % change y-o-y 6.8 3.5 3.0 3.5 3.5 3.5

Refined Products Net Exports, 000b/d -243.9 -256.4 -267.4 -281.1 -255.5 -183.6

Refined Products Net Exports, % change y-o-y 10.6 5.1 4.3 5.1 -9.1 -28.1

Refined Products Net Exports, US$bn -10.6 -10.6 -10.9 -11.3 -10.0 -7.0

Refined Products Net Exports, US$ % change y-o-y 12.9 0.0 2.7 4.0 -11.3 -30.7

Refined Products Net Exports, US$bn at US$50/bbl -4.7 -4.9 -5.2 -5.6 -5.0 -3.5



Refined Products Production (inc ethanol and non-conventional),000b/d 132.8 133.5 134.1 134.4 174.6 261.6

Refined Products Production (inc ethanol and non-conventional), %change y-o-y 0.5 0.5 0.5 0.2 29.9 49.8

Refined Products Consumption (inc ethanol and non-conventional),000b/d 376.1 389.3 401.0 415.0 429.5 444.5



Vietnam Refining - Production And Consumption, 2012-2017 - Continued

2012 2013e 2014f 2015f 2016f 2017f

Refined Products Consumption (inc ethanol and non-conventional), %change y-o-y 6.8 3.5 3.0 3.5 3.5 3.5


Table: Vietnam Refining - Production And Consumption, 2018-2023

2018f 2019f 2020f 2021f 2022f 2023f

Crude Oil Refining Capacity, 000b/d 450.7 500.7 500.7 500.7 500.7 500.7

Crude Oil Refining Capacity, % change y-o-y 30.6 11.1 0.0 0.0 0.0 0.0

Crude Oil Refining Capacity, Utilisation, % 86.8 89.8 94.3 94.5 94.7 94.9

Refined Petroleum Products Production, 000b/d 391.2 449.9 472.4 473.3 474.2 475.2

Refined Petroleum Products Production, % change y-o-y 50.0 15.0 5.0 0.2 0.2 0.2

Refined Products Consumption, 000b/d* 460.0 473.8 488.0 502.6 517.7 533.2

Refined Products Consumption, % change y-o-y 3.5 3.0 3.0 3.0 3.0 3.0

Refined Products Net Exports, 000b/d -68.8 -23.9 -15.6 -29.3 -43.5 -58.0

Refined Products Net Exports, % change y-o-y -62.5 -65.2 -34.6 87.6 48.2 33.6

Refined Products Net Exports, US$bn -2.3 -0.5 -0.2 -0.7 -1.2 -1.8

Refined Products Net Exports, US$ % change y-o-y -67.5 -77.2 -64.4 281.6 76.2 46.3




Refined Products Production (inc ethanol and non-conventional),000b/d 392.0 450.7 473.2 474.3 475.2 476.1

Refined Products Production (inc ethanol and non-conventional), %change y-o-y 49.9 15.0 5.0 0.2 0.2 0.2

Refined Products Consumption (inc ethanol and non-conventional),000b/d 460.1 473.9 488.1 502.8 517.9 533.4

Refined Products Consumption (inc ethanol and non-conventional), %change y-o-y 3.5 3.0 3.0 3.0 3.0 3.0




Vietnam's refining production is set for a rise. At

present, it only has one operating refinery - the

140,000b/d Dung Quat facility, located in QuangNgai province. It provides about a third of the

country's fuel needs, and Vietnam imports the

remainder of its fuel requirement. However, Dung

Quat has been plagued by persistent outages anddelays since it was brought online in 2009.

As demand for refined products continues to grow,

Vietnam has been facing a rising import burden.

However, its refining capacity is set for an increase.

The partners of Nghi Son refinery, to be located in

Thanh Hoa province, finally committed to the

project in January 2013; in October 2013, theyannounced that construction of the refinery had

begun. Costing US$9bn, Nghi Son will more thandouble the country's refining capacity when the

200,000b/d facility comes online in 2017 as planned.

Although PetroVietnam has put an expansion of Dung Quat's capacity to rest following an order from thegovernment, other projects will contribute to growth. A long-proposed refinery at Phu Yen has also beengiven the green light to proceed by Vietnam's Prime Minister. Initially slated for a capacity of 4mn tonnes

per annum (mpta, or 80,360b/d), the Vung Ro refinery is now planned to process twice the amount at160,720b/d. Construction of the plant began in 2013 and the project is scheduled for completion in 2018.

Another refinery project that has been proposed is PTT's Nhoi Hoi refinery in Binh Ding province. It is amega-refinery project designed to process 660,000b/d of crude oil. The Thai petrochemicals firm is stillconducting a feasibility study and if this goes well, the US$25-30bn mega facility could see constructionbegin in 2016 and come online by 2020. While the local government of Binh Dinh is supportive of the Nhoi

Hoi project, PetroVietnam has filed a complaint against it on grounds that its location is too close to DungQuat and a proposed 200,800b/d Van Phuong plant. Other projects proposed include state-ownedPetroVietnam's 200,900b/d plant in Long Son (though it is still struggling to find partners).

Vietnam Oil Products & CrudeTrade

2001-2023

e/f=estimate/forecast. Source: EIA, BMI



These recent developments have led us to revise our forecasts. Accounting for the additional capacity that

Nghi Son and Vung Ro will add to the Vietnamese market, we now project its refining capacity to increaseto 345,000b/d by 2017. By 2019, we expect this to reach 500,700b/d when both refineries hit their full

capacity.

This will put on toll on Vietnam's net crude oil exports, given rising domestic demand for crude to feed its

refineries. With crude oil output expected to trend downwards, growing refining capacity could see its net

exports of crude oil and other liquids fall from an estimate of 244,640b/d in 2013 to -101,630b/d by 2023.

In other words, the country is set to become a net crude oil importer by 2019 unless crude oil production

ramps up.

However, to account for expected delays in these

refineries as they ramp up to their peak capacities,

actual refined fuel production will rise more slowly,

from an estimate of 132,810b/d in 2013 to 260,790b/

d in 2017. This should hit 475,190b/d by the end of

our forecast period in 2023.

With total refined oil product consumption estimated

at 389,160b/d in 2013 and rising upwards to

444,410b/d in 2017 and533,230b/d in 2023, rising

domestic production would thus be able to offset

some of this. As such, we expect Vietnam's net

refined fuel import requirement to fall from an

estimate of 256,350b/d in 2013to 183,630b/d in

2017, and further still to29,320b/d by 2023.

Investment decisions on the Nhoi Hoi, Long Son and

Khanh Hoa projects present significant upside risksto our forecasts; Nhoi Hoi and Long Son could together boost Vietnam's refining capacity by 860,000b/d.

We have not factored these in, as the Long Son and Khanh Hoa proposals in particular could continue to

struggle to find finance to support their development.

Meanwhile, the large scale of PTT's Nhoi Hoi refinery - which could make Vietnam into a net fuels

exporter if it does indeed materialise - makes it a risky investment in Vietnam's tightly regulated domestic

fuels market, and in a regional market where fuel exports are likely to face fierce competition. Hence, we

Vietnam Refined ProductsProduction, Consumption & Trade

2001-2023

e/f=estimate/forecast. Source: EIA, BMI



will await clearer indications towards an FID on Nhoi Hoi before we will consider it in our forecasts.

However, we note that the prospects for Nhoi Hoi could pick up following an expression of interest in the

project by Russian petrochemical firm SamaraNefteOrgSintez (Sanors) in November 2013. Sanors chiefexecutive Igor Soglayev stated that the firm would need 'clear commitments of the involved governments'

before it would go ahead with investment.

Gas Supply And Demand

Table: Vietnam Gas Production, Consumption And Net Exports, 2012-2017

2012 2013e 2014f 2015f 2016f 2017f

Dry Natural Gas Production, bcm 9.3 12.0 12.3 13.2 13.7 13.3

Dry Natural Gas Production, % change y-o-y 20.6 29.5 1.9 7.5 3.9 -2.7

Dry Natural Gas Production, US$bn, % change y-o-y 22.8 25.2 -2.1 5.6 2.8 -4.7

Dry Natural Gas Production, US$bn at US$6/mn btu 2.0 2.6 2.6 2.8 2.9 2.9



Dry Natural Gas Production, % of Domestic Consumption 100.0 100.0 100.0 100.0 100.0 93.3

Dry Natural Gas Consumption, bcm 9.3 12.0 12.3 13.2 13.7 14.3

Dry Natural Gas Consumption, % change y-o-y 20.6 29.5 1.9 7.5 3.9 4.2

Dry Natural Gas Consumption, US$bn 5.1 6.3 6.2 6.6 6.7 6.9

Dry Natural Gas Consumption, US$bn % change y-o-y 22.8 25.2 -2.1 5.6 2.8 2.1

Dry Natural Gas Net Exports, bcm 0.0 0.0 0.0 0.0 0.0 -1.0

Dry Natural Gas Net Exports, US$bn 0.0 0.0 0.0 0.0 0.0 -0.5

Dry Natural Gas Net Exports, at US$50/bbl US$bn 0.0 0.0 0.0 0.0 0.0 -0.2

Dry Natural Gas Net Exports, at US$100/bbl US$bn 0.0 0.0 0.0 0.0 0.0 -0.5

o/w Pipeline Gas Net Exports, bcm 0.0 0.0 0.0 0.0 0.0 0.0

o/w Pipeline Gas Net Exports, % of total 0.0 0.0 0.0 0.0 0.0 0.0

o/w Pipeline Gas Net Exports, US$bn 0.0 0.0 0.0 0.0 0.0 0.0

o/w LNG Net Exports, bcm 0.0 0.0 0.0 0.0 0.0 -1.0

o/w LNG Net Exports, % of Total Gas Exports 0.0 0.0 0.0 0.0 0.0 1.0

o/w LNG Net Exports, US$bn 0.0 0.0 0.0 0.0 0.0 -0.5

na = not applicable; e/f = estimate/forecast. Source: EIA, BMI



Table: Vietnam Gas Production, Consumption And Net Exports, 2018-2023

2018f 2019f 2020f 2021f 2022f 2023f

Dry Natural Gas Production, bcm 12.8 12.4 11.9 11.5 11.1 10.8

Dry Natural Gas Production, % change y-o-y -3.7 -3.6 -3.7 -3.4 -3.3 -3.2

Dry Natural Gas Production, US$bn, % change y-o-y -4.7 -3.6 -3.7 -3.4 -3.3 -3.2




Dry Natural Gas Production, % of Domestic Consumption 90.9 90.1 81.4 72.5 67.7 64.8

Dry Natural Gas Consumption, bcm 14.1 13.7 14.6 15.8 16.4 16.6

Dry Natural Gas Consumption, % change y-o-y -1.0 -2.8 6.6 8.4 3.6 1.1

Dry Natural Gas Consumption, US$bn 6.7 6.6 7.0 7.6 7.8 7.9

Dry Natural Gas Consumption, US$bn % change y-o-y -2.1 -2.8 6.6 8.4 3.6 1.1

Dry Natural Gas Net Exports, bcm -1.3 -1.4 -2.7 -4.4 -5.3 -5.8

Dry Natural Gas Net Exports, % change y-o-y 35.7 5.3 100.0 60.0 21.9 10.3

Dry Natural Gas Net Exports, US$bn -0.6 -0.6 -1.3 -2.1 -2.5 -2.8

Dry Natural Gas Net Exports, US$bn % change y-o-y 34.3 5.3 100.0 60.0 21.9 10.3

Dry Natural Gas Net Exports, at US$50/bbl US$bn -0.3 -0.3 -0.7 -1.1 -1.3 -1.5

Dry Natural Gas Net Exports, at US$100/bbl US$bn -0.6 -0.7 -1.4 -2.2 -2.6 -2.9

o/w Pipeline Gas Net Exports, bcm 0.0 0.0 0.0 0.0 0.0 0.0

o/w Pipeline Gas Net Exports, % change y-o-y 35.7 5.3 100.0 60.0 21.9 10.3

o/w Pipeline Gas Net Exports, % of total 0.0 0.0 0.0 0.0 0.0 0.0

o/w Pipeline Gas Net Exports, US$bn 0.0 0.0 0.0 0.0 0.0 0.0

o/w Pipeline Gas Net Exports, US$bn % change y-o-y 34.3 5.3 100.0 60.0 21.9 10.3

o/w LNG Net Exports, bcm -1.3 -1.4 -2.7 -4.4 -5.3 -5.8

o/w LNG Net Exports, % change y-o-y 35.7 5.3 100.0 60.0 21.9 10.3

o/w LNG Net Exports, % of Total Gas Exports 1.0 1.0 1.0 1.0 1.0 1.0

o/w LNG Net Exports, US$bn 2,012.0 -0.7 -1.4 -2.2 -2.7 -3.0

o/w LNG Net Exports, US$bn % change y-o-y 0.0 0.0 0.0 0.0 0.0 0.0




New And Green

PetroVietnam estimates that its production of gas

was 9.3bcm in 2012, a 20.6% y-o-y increase from

the 7.7bcm recorded by the EIA for 2011. This can

be attributed to new output from TNK-BP's Lan Do

field in the Nam Con Son basin (which flowed firstgas in 2012), and increase in associated gasproduction from PTTEP's Block 16-01 Te Giac

Trang field and Premier Oil's Chim Sao field, both

of which are in the Cuu Long basin.

Otherwise, Vietnam's gas production is still in its

early stages. Its main producing fields have been the

Tien Hai C field in the Song Hong basin, TNK-BP's

Lan Tay field, Korea National Oil Corporation

(KNOC) and associated gas production fromoffshore oil fields such as Bach Ho and Rang Dong.

A ramp-up in production from Lan Do and Perenco's Su Tu Den oil complexes is expected over the

forecast period and several new projects set to come online. They include:

Gazprom's Moc Tinh and Hai Thach fields in the Nam Con Son basin. Production was launched inOctober 2013. Peak output is expected at 3bcm per year.

Vietsovpetro's Thien Ung and Mang Cau fields, also in the Nam Con Son basin. This will come online in2015 if it goes according to plans.

However, we see output gains here largely offset by decline in some of Vietnam's other producing gas

fields, notably Tien Hai C, Lan Tay, Rong Doi/Rong Doi Tay and Bunga Orkid, as well as lower associated

gas production at Bach Ho and Rang Dong.

Hence, we expect gas output to marginally rise from 12bcm in 2013 to 12.8bcm in 2018, before falling to

10.8bcm towards the end of our forecast period.

Vietnam Gas Production,Consumption And Net Import

Requirement

2001-2023




We highlight as well that there are significant upside risks to this forecast.

ExxonMobil's assets in the Phu Khanh basin, where two wells with gas shows were hit. Previously heldby BP, high hydrogen sulfide and carbon dioxide content had made production un-commercial. However,growing research and development in the removal of carbon dioxide from gas wells could improve theeconomics of development in the longer term and help bring this difficult gas source online.

Exploration by Eni in the Song Hong and Pku Khanh basins, both of which have known gas potential (seesection 'Oil and Gas Reserves'). Block B project in the Malay-Tho Chu basin. Chevron is reported to beseeking a partner to buy all of its interest in the field (42.8%). If it comes on-stream, peak output of 5bcmper year can be expected. Further upside potential could come from exploration of Vietnam'sunconventional resources. However, at this stage it is too early to tell if they can substantially boost thevolume of the country's gas output

Consumption Challenges

Despite the increase, Vietnam will require natural

gas imports from 2015 as a result of rampant

demand growth from both the power and industrial

sectors.

Although a downward revision has been made, our

Power team still anticipates that the power sector's

demand for gas for generation purposes will increase

at an average rate of 5.8% y-o-y between 2013 and

2017, and 3.7% y-o-y between 2018 and 2023.

Driving consumption growth will also be a second

US$1.3bn gas pipeline linking the Nam Con SonBasin with southern Vietnam. The link is to be built

by PetroVietnam according to state media reports

and could boost onshore gas supply by 30-40%.

These volumes are likely to feed the significant rise

in natural gas power generating capacity.

The transport sector will also likely witness an increase in Compressed Natural Gas (CNG)-poweredvehicles. State-owned gas distributor PV Gas reports that enterprises in Ho Chi Minh City are 'actively

switch[ing] to using CNG-powered vehicles', prompted by process which are 'cheaper by 30%' thangasoline, according to PV Gas. This includes 600 vehicles operated by PetroVietnam in Ho Chi Minh and

Supply Constraints

Distribution Of Imports And Domestic SuppliesIn Gas Consumption Mix

f = forecast. Source: EIA, BMI



the Ba Ria-Vung Tau province. The country also launched its first local CNG bus in April 2013, in addition

to the existing 30 imported CNG-based buses it already has.

This further supports a greater move towards CNG as a fuel in public transport. An additional 300 CNG

buses are expected by the transport department to serve Ho Chi Minh by April 2014. Gazprom and

Petrovietnam also signed an agreement in October 2013 for a joint venture project to use gas as a vehiclefuel. This could see closer gas collaboration between both Russia and Vietnam.

This informs our bullish view of Vietnamese gas consumption growth, which we expect to increase from an

estimate of 12bcm in 2013 to 16.6bcm by 2023 - or an average increase of 7.5% per annum over our 10-

year forecast period. The higher rate of consumption to production growth also means that Vietnam's self-

sufficiency in gas is expected to come to an end by 2015. A planned liquefied natural gas (LNG) importfacility, which has been slated for a 2015 start will supplement domestic supplies to meet the country's

needs (see sub-section 'LNG' below). However we expect the country's gas imports to increase from zero atpresent to 5.5bcm by 2022.

We see the main impediment to consumption growth as a supply-driven one, which has in turn influenced

our forecasts. It appears that additional import facilities - in the form of a 1mn tonnes per annum (tpa) - theequivalent of 1.38bcm - and 3mn tpa (4.14bcm) terminal will not come on-stream early enough or besufficient to sustain a double digit y-o-y gas consumption growth that Vietnam is capable of. Hence, growth

rate is expected to be erratic as a result of import infrastructure and domestic gas production constraints on

growth.

Our expectation of supply constraints to consumption growth assumes a 1mn tpa LNG import terminal to

come online in 2015 and a 3mn tpa facility to start operations in 2018. However, neither long-term supply

contracts nor plans for both LNG plants have been finalised and thus present significant downside risks to

our forecasts. On the other hand, a higher planned capacity for both terminals, if they can come into

operation soon enough, will present an upside. In addition, greater domestic gas production beyond our

current output forecasts will also help push consumption upwards.

LNG

LNG imports have been given priority status in Vietnam's 2016-2025 gas development plan, which was

unveiled in 2011. The first LNG regasification terminal is to be built in southern Vietnam, the second

terminal in the north and a third in central Vietnam.



However, construction plans have been slow to progress. We have taken into account two facilities

currently under development by PetroVietnam subsidiary PV Gas. These include a 1mn tonnes per annum

(tpa) LNG import terminal along the Thi Vai river in southern Vietnam (Thi Vai LNG), expected to beginoperations in 2015, and a second terminal (Son My LNG) with a capacity of up to 3mn tpa set to start uparound 2018-2020 at Binh Thuan in north Vietnam. They account for our forecast for the beginning of LNG

imports into Vietnam from 2015, and a bump in import capacity from 2018.

Both LNG terminals are mainly targeted at the power sector. PV Gas also plans to expand the capacity of

Thi Vai to 6-10mn tpa (8.3-13.8bcm) after 2020, but we have yet to factor this into our forecasts until plansare more concrete.

However, state-owned PV Gas has yet to sign any long-term supply contracts to secure gas for its planned

terminals. It has been in talks with Australia and Qatar. Parent company PetroVietnam has also been in talkswith Gazprom for 'deepening cooperation' in LNG marketing. It is in the midst of negotiating a long-term

supply contract with the Russian gas company, which would see PetroVietnam obtain gas from Gazprom's

Vladivostok terminal. Gazprom stated that a framework agreement could be signed before the end of 2013

at the time of writing. However, Vladivostok is not due to come on stream until 2018 at the very earliest.

Therefore, it is likely that PetroVietnam could source most of its gas via short-term contracts before this

date.

Revenues/Import Costs

In 2013, we expect Vietnam's net crude oil exports to have risen to about 244,600b/d from about 226,900b/d

in 2012. This is set to continue until 2015, until an expansion in Vietnam's refining capacity takes place.

This could see an increase in crude oil export revenue from US$9.1bn in 2012 to US$9.3bn in 2013. By2018 and 2023, however, Vietnam could turn from a net crude oil exporter into a net crude oil importer,

when both the Nghi Son and Vung Ro refineries come online and increase refinery demand for crude oil by

about 360,000b/d. Crude oil exports could thus fall to around 28,900/d in 2018, and Vietnam could have to

import 101,600b/d of crude oil by 2023 at a cost of US$3.5bn.

This could be offset by a decrease in its refined oil products import requirement. Growing consumption

would see refined oil product imports initially rise from an estimate of 256,400b/d in 2013 to 281,100b/d in

2015, before falling to 68,800/d in 2018 and 58,000b/d by 2023. Its import bill for refined oil products

would also fall from US$11.1bn in 2013 to US$2.9bn in 2018 and US$2.4bn by 2023.



Key Risks To BMI's Forecast Scenario

A key risk to our forecast is Vietnam's economy, which at present is seeing increasing instances of non-

performing loans (NPL). If a banking crisis breaks out as a result, its economic growth - which our demandforecasts are dependent on - will be affected.

Oil revenues are also highly dependent on price fluctuations; changes in crude oil prices will affect the

country's total import bill for oil and gas.



Industry Risk Reward Ratings

Asia - Risk/Reward Ratings

BMI View: Asia's Oil & Gas Risk/Reward Ratings are characterised by the following: good reward scoresare concentrated in states with high below-ground potential and good demographic profiles, but good riskscores are mainly found in countries that have poor resource profiles. In the upstream category, with theexception of Australia, several resource-rich countries underperform as a result of poorer risk scores.Papua New Guinea has moved dramatically up the upstream table, thanks to pending liquefied natural gasdevelopments in the country and high resource potential. In the downstream segment, traditional giants

such as Singapore, South Korea and Japan still dominate the top spots, thanks to strong risk performancesfrom stable operating environments. However, we warn that emerging countries such as China arechallenging the traditional leaders and could see their overall scores improve if the domestic regulatoryenvironment eases up.

The main themes arising from BMI's Oil & Gas Risk/Reward Ratings (RRRs) for Asia are:

High level of state involvement in the sector keeps industry scores low relative to other regions, as ittakes a toll on Country Rewards and Industry Risk scores, both of which assess different facets of thelevel of state involvement and control over the sector.

Unsurprisingly, countries with large below-ground potential top the Upstream RRRs tables. However,there are several countries with huge exploration potential that have underperformed. Indonesia is a casein point, as increasing signs of state intervention have led to the deterioration of its operatingenvironment. This has in turn pushed down its Country Rewards and Risk scores, placing it in 11thposition in our upstream Risk/Reward rankings.

Interestingly, with the exception of Australia, it is the markets with poor Upstream Rewards such asJapan, Hong Kong, South Korea and Singapore that show some of the highest scores in Industry Risks,which has in turn lifted their final Upstream Risk/Reward scores. Nonetheless, poor below-groundprospects leave them at the bottom of the regional table.

In the long term, we see room for Upstream Rewards to grow on the back of reserves and productiongrowth as unconventional exploration looks set to pick up.

For Singapore, Japan and South Korea, large downstream capacities combined with strong operatingenvironments have helped them maintain their high positions in our regional Downstream RRRs.Nonetheless, these countries are gradually losing their advantage as they come under challenge fromemerging competitors, such as India and China, which have larger markets and newer plants. China, forexample, already ranks second in our downstream ratings table.

Although some of the world's fastest-growing downstream market demand is in Asia, fuel priceregulation and high energy dependency in many developing markets have pushed down scores forCountry Rewards and Risks. As a result, many countries such as Vietnam and Indonesia haveunderperformed in our downstream rankings. The continuation of high crude oil prices and fuel subsidiesposes significant downside risks to the profitability of the downstream segment in many Asiandeveloping countries.



Countries that top our overall RRRs perform relatively well in both upstream and downstream, though wedo highlight that Australia is at risk of losing its leading position in our ratings, as the gap with runner-upChina gradually narrows.

Table: Asia's Oil & Gas Risk/Reward Ratings

Upstream R/R Ratings Downstream R/R Ratings Oil & Gas R/R Ratings Rank

Australia 68.6 60.0 64.3 1

China 57.2 61.6 59.4 2

Vietnam 63.5 51.7 57.6 3

India 53.8 56.7 55.3 4

Japan 48.3 61.5 54.9 5

Thailand 54.1 54.4 54.3 6

Malaysia 56.5 50.1 53.3 7

Papua New Guinea 61.8 44.7 53.2 8

Pakistan 55.7 49.7 52.7 9

Singapore 39.3 64.7 52.0 10

Philippines 52.7 50.8 51.8 11

South Korea 33.2 60.2 46.7 12

Indonesia 40.0 47.8 43.9 13

Hong Kong 35.8 52.1 43.9 14

Taiwan 16.9 36.5 26.7 15

*Higher rating = Lower risk. Source: BMI

The Upstream Leaders

Australia has the highest overall scores in the upstream ratings. Its profile is bolstered by its excellent

performance in Country Rewards, for which it leads the region by a wide margin, and a good overall

position in terms of risks. The country is an open market with a competitive environment and has relatively

well-developed links to the export market. This has more than compensated for its less impressive and

declining showing in Upstream Industry Rewards, in which it is surpassed by Vietnam, Malaysia, China,

India and Papua New Guinea. Unconventional resources and underexplored regions of Australia provide

further growth opportunities. However, high costs and growing infrastructure constraints as exploration and

production (E&P) moves beyond Western Australia is seeing the country's lead in the upstreamprogressively narrow. This trend continues this quarter, with scores for Australia's overall upstream risks

and rewards declining from 71.2 in Q413 to 68.6 in Q214.



Imbalance Of Risks And Rewards

Asia Upstream Risk/Reward Ratings

*Higher score = lower risk; Scores out of 100. Source: BMI

Vietnam remains in close second place in our Upstream RRRs thanks to its leading regional rewards score

arising from its good below-ground potential and its under-explored waters. Promising gas output growth

prospects arising from a number of encouraging finds to date, proven oil reserves, and a healthy level of

offshore industry activity maintains the country's leading position in Asia for Industry Rewards. Policy

continuity and above-average participation from private players in Vietnam's upstream segment for the

region also lend support. However, a poor performance on corruption and rule of law, and E&P in the

contested South China Sea, where many of these prospects lie, poses a significant downside risk to the long-

term returns of venturing deeper into Vietnamese and Philippine waters.

Unconventional exploration and investment has helped China retain fourth place in the regional upstream

table, thanks to a second-best score in the region for upstream Industry Rewards. However, at the moment,

unconventional exploration in the country has been slow and could be complicated by its difficult

geology. China has a reasonable Country Rewards rating but its score in this category is mainly dragged

down by the significant role played by the state in the oil and gas sector. State ownership of upstream assets

remains a constraint to better performance.



On the back of revisions in our production forecasts for Papua New Guinea (PNG), the country has recentlyseen a steep increase in its Upstream Industry Rewards. The country's significant gas finds offshore, the

almost complete liquefied natural gas (LNG) terminal, underexplored gas-rich acreage and its strategiclocation for exports to the Asian market have fed into its overall ratings, sending it four places higher to sit

third in our regional upstream table, slightly behind Vietnam.

Resource-Rich Countries Hit By State Involvement

State involvement in the upstream sector continues to weigh on the RRRs of some of the most resource-rich

countries. Although most oil and gas projects are licensed under the production sharing contract (PSC)model, most of them involve high local content requirement and entitle national oil companies (NOCs) tolarge shares in new projects. This regulatory framework has pulled down scores in India, Malaysia andIndonesia in recent quarters, despite these countries' sizeable resource bases.

Resource-Rich Countries Underperforming In Risk Category

Upstream Risk/Rewards For Selected Countries

*Higher score = lower risk; Scores out of 100. Source: BMI



For example, Malaysia performs increasingly well in terms of Upstream Industry Rewards, supported by a

favourable gas reserves to production ratio. However, its overall score is dragged down by its mediocre

Industry Risk score due to a continued large presence of state ownership of upstream assets. In addition, the

country's broader Country Risk environment remains only mildly attractive, with relatively low scores for

corruption and rule of law which undermine its overall performance.

Indonesia is another case in point, with mediocre scores for Country Risk and Rewards. A highly involved

government and contradictory policies present strong limitations to its upstream segment despite strong

below-ground potential. Creeping resource nationalism in past quarters is also a threat to Indonesia's

Industry Risk scores, as the increasingly intrusive government could introduce more restrictions to private

production and marketing activity, and as a growing domestic reservation requirement for oil and gas output

makes it less attractive than other countries in the region. Similarly, the state's low scores for corruption,

rule of law and infrastructure undermines its overall performance.

Although regulatory troubles are hindering India's short-term potential, we highlight that if they are

overcome, the country could see its Upstream RRRs scores improve. Indeed, India has gas potential, but

current production falls well short of the country's ultimate potential. In fact, the upward adjustment ofdomestic gas prices to nearly double that of the previous level by April 2014 is a positive sign for the

country. Although prices of about US$8 per million British Thermal Unit (mnBTU) are st

bmi vietnam oil and gas report q2 2014

Documents

vietnam oil production

vietnam gas production

vietnam refining production

oil supply

business monitorinternational

gas supply

gas reportincludes

oil products trade