China Closes The Door On Vietnam’s Oil And Gas Ambitions

offshore rig

 

As China tightens the noose over Vietnam’s ability to drill for oil and gas in its own UN-mandated 200-nautical mile Exclusive Economic Zone (EEZ), the country is turning to solar energy and other renewables to make up for lost ground.

Over the weekend, Singapore-based Sunseap Group broke ground on Vietnam’s largest solar farm, a 168-MW project in Ninh Thuan province. The $150 million project will become operational in June 2019 and supply more than 200 kWh of electricity to the national power grid annually, Sunseap said in a statement.

Vietnam backed against the wall

The quandary for Vietnam is that this increased electricity demand comes as the country’s natural gas reserves needed for power generation are being depleted. In an effort to offset this decline, the country needs to either import liquefied natural gas (LNG), pivot back to coal or explore for more of its own gas resources.

LNG for its part is the most expensive of the three choices, while Vietnam still doesn’t have its first LNG receiving terminal. Prices for LNG also fluctuate, particularly spot prices during during peak season in the winter months. Also, with a ramp up in gas and LNG demand coming from China per Beijing’s mandate that gas make up at least 10 percent of its energy mix by 2020, upward pressure will weigh on LNG prices in Asia going forward.

Coal for its part has been one of the fuels of choice in Asia for power generation but it’s also the dirtiest burning hydrocarbon and countries in the region are trying to reduce their coal and carbon foot prints. This leads to Vietnam’s plans to explore for and produce more of its own gas off its coast.

However, twice in the past year Beijing has pressured Vietnam to stop gas projects within Vietnam’s own territorial waters, which Beijing also claims as part of its so-called nine-dash line that comprises more than 90 percent of the South China Sea.

Two months ago Hanoi caved into pressure from Beijing, and ordered Spanish energy firm Repsol to stop drilling for oil and gas at the Red Emperor block in waters off Vietnam’s southeast cost. The Spanish company and PetroVietnam were joint partners in the venture.

The project was in its final stages, while the pull-out could cost Repsol some $200 million in lost investment, a figure that that the Madrid-based company says it wants Vietnam to reimburse.

Also, last July Vietnam also ordered Repsol to stop oil drilling operations at an adjacent location, Block 136/3, in response to what media at the time called “threats from China.”

Taking it to the streets

All of these developments up the ante for Vietnam, a country that has complex economic and political ties with its giant neighbor to the north. However, most Vietnamese have a decided anti-China stance that is complicating matters even more for the government.

This weekend, as ground was being broken on the country’s largest solar project, protesters in the country’s capital, Hanoi, and economic hub, Ho Chi Minh City (Saigon), took to the streets in large numbers to protest a recent government move that would allow foreign firms to lease land for up to 99 years in three special administrative and economic units. The concern for most Vietnamese is that the new deal will be dominated by China.

Full article: China Closes The Door On Vietnam’s Oil And Gas Ambitions (OilPrice)

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