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Gazprom/PetroVietnam Joint Venture on Two Offshore Gas Blocks

After the Nam Con Son 2 pipeline construction project was awarded in early February, it was only a matter of time before the development plan for the fields it would service would be announced.  Yesterday Gazprom said that they were entering into a joint venture with PetroVietnam, holding a 49% stake in the project:

...that will develop two blocks off the coast of the southeast Asian country.

At a meeting in Vietnam, the parties agreed to jointly develop block 05.2 and block 05.3 in the South China Sea. The two blocks hold the Moc Tinh and Hai Thach gas condensate fields with estimated reserves of 55.6 billion cubic meters and 25.1 billion cubic meters, respectively.

The two companies plan to drill 16 exploration wells at a depth of between 2,000 meters and 4,600 meters, Gazprom said in a statement.

The fields are north of where the existing Nam Con Son 1 pipeline runs currently.  The new pipeline will be 293 km long and connect directly to a processing facility in Ba Ria-Vung Tau.  The cost is projected to be $1.2 billion and is due to be ready by 2014. 

This deal with Gazprom continues the trend of drawing them and PetroVietnam closer together on energy production, as the companies have a long history of working together on projects off the coast of Hanoi, having recently set up separate companies for developing projects for third parties, Gazpromviet.  While nothing has been announced yet for the other two blocks that the new pipeline will service, from this press release it looks likely that Gazprom will land them as well.

In May 2008 Gazprom and Petrovietnam inked the Agreement on Further Cooperation. The Agreement stipulates geological exploration and further development of four new blocks offshore Vietnam as well as incorporation of the Gazpromviet joint venture to run its business in Russia and third countries with the following shareholding structure: Gazprom – 51 per cent and Petrovietnam – 49 per cent.

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Peter Pham is an author, international fund manager, and a registered financial director by the Cayman Monetary Authority (CIMA). In 2013 he published his first book entitled, The Big Trade: Simple Strategies for Maximum Market Returns. He currently manages the portfolio of a global hedge fund and runs an asset management company, Phoenix Capital.  (read more)

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