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Vietnam extends JX license to develop light sweet crude at Phuong Dong to 2025

Tokyo — The Vietnamese government has granted an extension to JX Nippon Oil & Gas Exploration's license to develop the offshore Phuong Dong oil field by five years until April 2025, giving it more time to develop light sweet crude oil, a grade which is gaining in popularity for cleaner marine fuel sulfur production.

The five-year extension of the license comes as Japan Vietnam Petroleum Company, a wholly-owned subsidiary of JX NOEX, was seeking to extend the right to develop the Phuong Dong oil field in Block 15-2 beyond April 2020.

The latest development will ensure the stability and continuity in Vietnam's E&P activity in Block 15-2, following the five-year extension of JVPC's license in the Rang Dong oil field in the block in 2013 to April 2025 from April 2020. The license was also granted to implement enhanced oil recovery by using hydrocarbon gas at the Rang Dong oil field.

Production from the Phuong Dong oil field is shipped as Rang Dong crude oil, a low sulfur light grade, together with output from the adjacent Rang Dong oil field in Block 15-2, operated by JVPC, a JX NOEX spokesman said Monday.

The JX NOEX spokesman added that the company is lifting an equity output of about 5,000 b/d of the low sulfur light crude from the Rang Dong and Phuong Dong oil fields, declining to elaborate on total output from the offshore fields. JVPC has a 46.5% stake in the Rang Dong oil field, and holds a 64.5% stake in the Phuong Dong field.

JX NOEX, the upstream arm of JXTG Holdings, sold an average of 93,000 b/d of oil equivalent over April-September, when its Vietnam sales accounted for about 4% of the total sales volume.

Favored for IMO

Vietnamese crude output and exports have been in continuous decline in recent years due to naturally aging fields. Most recent data from the country's General Statistics Office showed the country produced 9.345 million mt of crude oil over the first 10 months of 2019, down 7.2% year on year.

Vietnam's crudes are typically waxy and sweet, and are highly sought after by end-users across Asia for their high yields of vacuum gasoil.

Vietnam, however, is expected to benefit from the increased demand for low sulfur crudes heading into 2020 as bunker fuel suppliers seek feedstock that can produce International Maritime Organization-compliant marine fuels, according to traders.

Light sweet crudes are among grades favored by refiners to produce marine gasoil and low sulfur fuel oil that complies with the IMO's sulfur limits for marine fuels from next year. The IMO will cap global sulfur content in marine fuels at 0.5% from January 1, down from the current 3.5%.

--Takeo Kumagai, takeo.kumagai@spglobal.com

--Andrew Toh, andrew.toh@spglobal.com

--Edited by Claudia Carpenter, claudia.carpenter@spglobal.com