Russia's top oil and gas companies signed a number of cooperation agreements and memoranda with Vietnam's oil and gas corporation PetroVietnam Monday, during Vietnam's prime minister's visit to Moscow, as Russia firms its interest in energy partnerships with Asia-Pacific.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
Of the total of eight agreements signed, five touched on oil and gas, and were sealed in the presence of the countries' prime ministers, Russia's Dmitry Medvedev and Vietnam's recently appointed Nguyen Xuan Phuc, whose Moscow visit became the first foreign trip since taking office last month.
PetroVietnam signed a cooperation agreement with Russia's Rosneft, two memoranda of understanding with gas giant Gazprom -- on new oil and gas upstream projects and gas use in power generation -- and a production sharing agreement with Vietsovpetro, its joint venture with Russia's Zarubezhneft.
The deals came as a step forward in the "strategic level of energy cooperation" between Moscow and Hanoi, Medvedev said.
Article Continues below...
The partnerships have been expanding in the past three decades, with energy projects making a chunk of last year's $4 billion trade turnover, Medvedev said.
He described the countries' energy cooperation situation as "favorable," with plenty of room for growth.
"We have a long-running cooperation in the energy complex. We have good relations in oil and gas production, hopefully refining, too. They are firming and growing year by year since the emergence of our flagship collaboration [project], Vietsovpetro, in 1981. But it doesn't mean there is nothing left to do," Medvedev said.
Both countries' governments have agreed to stimulate the new projects with tax breaks, to ensure "they bring good return to our countries' budgets," Medvedev said.
With the above three Russian companies actively developing Vietnam's offshore fields, and PetroVietnam working on Russian West Siberian projects, Medvedev called the energy cooperation level unprecedented.
"Not only are supplying our technology, and producing oil and gas, but we have also in fact swapped fields, which we practically have not done with any other country. In that sense, we have an absolutely advanced form of cooperation," Medvedev said.
Vietnam's prime minister echoed the sentiment, saying the new deals offer favorable conditions for implementation of these projects.
Igor Sechin, CEO of Russia's top crude producer Rosneft, and Nguyen Quoc Khanh, chairman of PetroVietnam's Board of Management, signed a cooperation agreement that foresees expanding collaboration in Russia, Vietnam and third countries in hydrocarbons exploration and production, refining, marketing and logistics, as well as staff training, Rosneft said in a statement.
The agreement foresees the companies studying potential options for joint projects and defining key cooperation conditions, as well as setting up work groups for each of the cooperation directions, it said.
While Rosneft is interested in further expanding its business in Vietnam, the deal also offers yet another way into broader Asian region for Rosneft, which has been targeting the region as a prospective crude market, Sechin said in the statement.
"The new stage of cooperation will allow the company to gain a new channel for crude sales in the Asia-Pacific region, and potentially, create additional synergy through refining in the region," he said.
The Russian company has considered the growing Vietnamese market as a prospective region for its crude and oil product sales, having tentatively agreed on crude deliveries to the Dung Quat refinery in Vietnam in 2014.
Rosneft, as well as Gazprom Neft, earlier indicated their interest in entering the refinery's shareholding but the talks have been put on hold.
Rosneft already partners PetroVietnam in a production sharing agreement on gas and condensate production and geological exploration at Block 06.1 offshore Vietnam, where Rosneft Vietnam serves as an operator with a 35% stake. Rosneft Vietnam fully owns the neighboring 05-3/11 block.
The two companies also have stakes in the Nam Con Son pipeline carrying gas and condensate from offshore blocks to onshore power complexes.
Another Russian oil company with a long-term presence in Vietnam, Zarubezhneft, signed as part of Vietsovpetro, a 30-year production sharing agreement on Vietnam's offshore Block 16-1/15 with Vietnam's oil and gas exploration and production company PVEP, Bitexco and Sovico holding company.
The project, valued at at least $50 million, foresees two development phases, including seismic data interpretation and two exploration wells drilling in phase one in the first three years, and sampling exploration and a survey well drilling in the second phase in the following two years, Zarubezhneft said in a statement.
Vietsovpetro will operate the project with a 52% stake, with PVEP holding 29%, and Bitexco and Sovico owning 10% each, said the statement.
Zarubezhneft has two joint ventures with PetroVietnam, a 49:51 JV Vietsovpetro working in Vietnam, and a mirror 51:49 JV RusVietpetro working in Russia's Yamal Nenets autonomous region.
Finally, Gazprom's MOUs with PetroVietnam foresee exploring the possibility of using gas from joint projects offshore Vietnam, as well as Gazprom's LNG for power generation in Vietnam. The companies set up a JV for gas motor fuel production last October.
Gazprom and PetroVietnam have two JVs, Vietgazprom and Gazpromviet, developing fields offshore Vietnam and in Russia's Orenburg and Yamal Nenets regions, accordingly.
An additional agreement between the companies signed Monday foresees collaboration in education.
Other agreements between the countries included an MOU between Russian Direct Investment Fund and Vietnam's State Capital Investment Corporation (SCIC) foreseeing each side investing $250 million, in joint non-energy projects and helping Vietnam's large and medium-sized businesses enter Russia.
--Nastassia Astrasheuskaya, email@example.com
--Edited by Jeremy Lovell, firstname.lastname@example.org