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November 20, 2008

Vietnam oil output to rise 25% to 65,000 bpd by year-end
Output at Su Tu Vang, Vietnam's biggest oilfield to come on stream in the past five years, is expected to double to 65,000 barrels per day (bpd) by year-end, boosting national crude production by 25 percent to 325,000 bpd, reported Reuters.

The new production from Su Tu Vang, marketed as the existing Su Tu Den crude, would bring Vietnam's total Su Tu Den exports to more than 100,000 bpd, the field's operator, Cuu Long JOC said in a statement on Wednesday.

Su Tu Vang (Golden Lion) and Su Tu Den (Black Lion), which has been in production since October 2003, are expected to have a life span of about 20 years, Cuu Long JOC General Director Vu Ngoc An told Reuters on the sidelines of Su Tu Den's first oil ceremony in Hanoi.

An said Su Tu Vang's output rose to about 60,000 bpd after four of a total of six wells were put into operation earlier this week.

"The oil flow at the wells was very impressive and we had to limit production because the new FSO installation would only be completed later this week," An said.

Before Su Tu Vang's commercial production in October, Vietnam's total crude oil production averaged about 260,000 bpd, officials from Petrovietnam have said.

Su Tu Vang's floating storage vessel M/V Queensway has a storage capacity of 1.1 million barrels. The additional output has already started to weigh on the price of medium-light sweet Su Tu Den crude.

Last week, several companies agreed with Vietnam to buy term volumes of Su Tu Den for the first half of 2009 at a deep discount of $2.20 a barrel to Minas quotes, likely the deepest discount ever fetched in term discussions for the grade.

In contrast, for the current July-December term supplies, lifters had agreed a record-high premium of $7.00 a barrel.

Adding pressure to the rising output, weakening oil demand in Asia has pushed most Vietnamese crude to record-deep discounts to their benchmarks over the past two months.

Cuu Long JOC, led by U.S. oil firm ConocoPhilips (COP.N: Quote, Profile, Research, Stock Buzz) and Petrovietnam, said in a statement it planned to put into operation all six wells in the Su Tu Vang oilfield by the end of 2008 to reach the output target of at least 65,000 bpd.

At a production of 100,000 bpd, the Su Tu Den grade crude is expected to overtake Bach Ho next year as Vietnam's flagship crude export since most of the Bach Ho output, which now stands at 150,000 bpd, would be used for the country's first refinery, the 140,000-bpd Dung Quat plant.

"Even when Dung Quat is at full capacity by the end of 2009, crude exports should still be maintained at nearly 200,000 bpd, thanks to the oil from block 15.1," a Petrovietnam official said, referring to the block housing Su Tu Den and Su Tu Vang.

Five to six companies might have agreed to buy up to 60,000 bpd of Su Tu Den crude via term deals for the first half of next year, traders said last week.

The rest are expected to be sold through monthly spot tenders, whose volumes have already surged this quarter, with some 1.2-1.5 million barrels offered for November and December, after the startup of Su Tu Vang.

The Petrovietnam official also said Cuu Long JOC planned to start production of smaller fields within block 15.1, which has been touted as the Golden Triangle by Vietnam's oil sector, to ensure stable production of more than 100,000 bpd in the next several years.

"In addition to the fields we have discovered in block 15.1 we will find more fields there and there will be more lions in our herd," Cuu Long JOC General Director An said, referring to the lion names of the oil fields within the block.

Block 15.1 is 50 percent owned by Petrovietnam. Conoco holds 23.3 percent. Other stakeholders include Korea National Oil Co with a 14.2 percent stake, SK Energy (096770.KS: Quote, Profile, Research, Stock Buzz) with a 9 percent stake and France's Geopetrol with 3.5 percent.

Crude oil export is one of Vietnam's top cash earners with revenues in the first 10 months jumping more than 43 percent to nearly $9.5 billion, reflecting higher oil prices earlier this year.

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