2.1. Stakeholders, Location and Oil Reserves

ELEN Oil Company, will join forces with PetroVietnam (PVN) to develop and operate a gas reservoir in Block 21 at the Nam Con Son basin, offshore Vietnam (figure 1). PetroVietnam is the national oil company of Vietnam. It owns and operates a major part of the local oil and gas infrastructure and dominates the upstream and downstream market in Vietnam. Due to the fast growing energy demands in Vietnam, PVN seeks to develop the deepwater offshore reserves of Vietnam.

Vietnam-Block-21-Bi-aN-Phia-Nam-field

PetroVietnam, which holds the licence for Block 21, will contribute to the project with its extensive experience in the local oil and gas industry. ELEN Oil will bring its pioneering deepwater expertise and its state of the art business philosophy. This project is also an opportunity for ELEN Oil to enter the Vietnamese market, since it does not operate any fields in Vietnam.

The proposed development is located 280 km from the shore at a water depth of 250 m. It is a carbonate reservoir consisting of two connected gas fields. The Bi aN phia Nam-1 field and the Em trai-2 field. The Estimated Ultimate Recovery is 6.5 Tcf of gas (185 billion m³) and 58 mmbbl of oil. Table 1 summarizes the key characteristics of the project.

Reservoir-rock-Bi-aN-phia-Nam

Table 1: Project Overview

  • Location: Block 21, Nam Con Son Basin, Vietnam (107.29E , 06.15N)
  • Water depth: 250 m
  • Joint Venture: 60% PetroVietnam, 40% ELEN Oil
  • Recoverable hydrocarbons: Gas: 6.5 Tcf , Oil: 58 mmbbl
  • Reservoir: Carbonate Rock, 6000psia, 150°C
  • Reservoir average depth: 3000 m
  • Daily plateau production: 800 mmscf/d (23 million m³ per day)
  • Host: platform FPSO
  • Gas Export: Single phase pipeline
  • Oil Export: Shuttle tanker

2.2. Nearby Infrastructure

The main gas consumers are power stations, industrial areas and fertiliser plans near Ho Chi Minh city. There are two pipeline projects connecting offshore fields near block 21 with onshore power plants, gas facilities and gas distribution systems.

Nam Con Son 1 pipeline is already operational and connects the fields within block 06-1 with facilities at Vung Tau, near Ho Chi Minh city.

Nam Con Son 2 pipeline (blue line, see figure) will be operational by 2014. General facts about the pipeline are shown in Table 2. According to PetroVietnam, Nam Con Son 2 pipeline will have enough spare capacity to transport the production from the Block 21. A possible tie-in location for connecting to Nam Con Son 2 is near Hai Thach field, approximately 170 km northwest from Bi aN phia Nam-1 field.

Nam-Con-Son-pipeline

Table 2: Nam Con Son pipeline

  • Owner: PetroVietnam Gas Corporation (PV-Gas)
  • Offshore lengt: 340 km (from blocks 04-2/3 & 05-2/3 of Nam Con Son basin to Long Hai District)
  • Diameter: 26 inches
  • Flow: Two-phase wet gas transport
  • Nominal capacity: 680 mmcf/d
  • Operational by: Q4 of 2013 or early 2014
  • Distance of tie-in: point from Block 21 170 km

 

2.3. Objectives

The main objectives of this project for ELEN comapny are:

1. To develop a profitable field. The project should be profitable for all recovery scopes (low, mid, high).

2. To establish ELEN Oil’s position in the Vietnamese market. A main objective is to developed strong ties of respect and trust with the local partners and stakeholders. Further, to gain access to the gas and oil infrastructure and to the local market.

3. To strengthen ELEN Oil’s reputation in Vietnam. This project should highlight ELEN Oil’s core values. Specially, its devotion to sustainable development and its aim to benefit local communities. It should be made obvious that ELEN Oil is reliable, trustworthy and socially friendly company that aims for a long-term presence in Vietnam.

4. To assess the option expansion options develop an expansion strategy for ELEN Oil. The project should be the foundation for further development. Thus, the opportunities in the area were identified and the final development plan contains elements that can serve such an expansion strategy

2.4. Joint venture proposal

The propose share distribution for the Joint Venture (JV) is:

  • Petro Vietnam:   60%
  • ELEN Oil:    40%

Main gain for PVN

Due to its long history in the oil industry, ELEN Oil has gained an enormous amount of knowledge and experience. PVN has therefore the unique possibility to benefit from this joint venture. Knowledge transfer and the prospect of a long term alliance with a reliable and credible partner are a good reason to embark on this opportunity.

Main risk for ELEN Oil

ELEN Oil has a long-standing business relationship with China. It is has a vested interest in keeping these ties close in the future, due to several large investments that have been made in the recent past. Given the political tension between Vietnam and China, ELEN Oil could be faced with a situation where their business interests are caught up between the two sides. This makes the decision process very delicate, since ELEN Oil does not want to exasperate any of the parties involved.

Project management team

The lower-management will consist of a ELEN Oil and a PetroVietnam manager. PetroVietnam will manage the export and sales part. ELEN Oil will manage the technical and operational part.

An safety-team, consisting members from both ELEN Oil and PetroVietnam will work idenpendently from the managment. Their work will be to constantly identifying and monitoring possible risks and preventing HSSE incidents. Both lower-management and the Safety-team will report to the project director. 

2.5. Key risks

1. Reservoir uncertainty
The main economic risk is the uncertainty regarding the recoverable hydrocarbons. This can lead to overdesigned facilities and higher CAPEX that would be difficult to repay in the case of low scope for recovery. Moreover, lower production can result in heavy penalties for failing to deliver the gas volumes as per the gas purchase agreements set prior the development

2. Bureaucracy in Vietnam
The main political risk is the ineffective and bureaucratic system in Vietnam that can lead to delays in the field development.

3. Territorial disputes
China claims a very large part of the Shouth Chinese Sea (Figure 2) . The proposed field develop-ment lies just outside of the claimed Chinese borders. Apart from the risk of armed conflict, this situation has an additional risk for ELEN Oil. This rises for the fact that ELEN Oil has a good relationship with China from the many years of joined oil and gas projects. The challenge will be to keep that relationship unaffected.

South-China-Sea-territorial-dispute-map

4. Uncertainty in gas market.
The main commercial risk is delays in constructing new power plants in South Vietnam as fast as is currently projected. However, there are options for alternative gas consumers such as large industrial areas and gas product factories that can consume some of the production.

5. Failing to build good reputation in Vietnam.
Important risks are the failure to engage positively with the local communities and the risk from major HSSE incidence. Those risks can damage ELEN Oil’s reputation and raise obstacles in establish-ing ELEN Oil in the Vietnamese market.

A complete risk register using TECOP clasification can be found in appendix E

2.6. HSSE framework

HSSE plays a major role in the offshore industry. Failing to address and control all HSSE issues can have a tremendous impact on the personnel, the environment, the society and the companies involved. Thus, great effort and much attention have been devoted on eliminating or mitigating HSSE risks during the design phase. Further, during operation an independent safety-team, will work on constantly identifying and monitoring possible risks and preventing HSSE incidents.

Health
The health of the work force is paramount. Vaccination shall be mandatory to prevent diseases. Emissions and noise levels shall be minimized. A team of health workers and doctors will be on standby to deal with minor injuries. In case of complicated accidents and large numbers of injuries, transport to predetermined hospitals shall be according to evacuation plan.

Safety
During construction and operation safety of personal is ensured by enforcing strict standards and guidelines. This includes frequent safety training and the availability of adequate safety equipment. The workers need to be trained for possible minor and severe accidents (fires/explosions). The safety of local communities and sea users needs to be ensured by planning and by informing the other sea users.

The environmental conditions in the South Chinese Sea can be very harsh. The structure needs to be designed to withstand typhoons that are known in the area. From typhoon class III all personnel should be evacuated.

Security
There are two main concerns regarding security in the South Chinese Sea. First the dispute over the Exclusive Economic Zones which can trigger armed conflicts that would eventually impact normal field operation. In such a case, it is favourable to have assets that can be easily moved to a secure location.

The second concern is the increase of pirate activities in the region. Until now the Vietnamese parts of the sea are relative save. However, the shipping lanes passing the field are likely to become future targets. In order to minimise the risk to human life there should be a plan in place and training on how to handle such circumstances. There should be close contact with security agencies to get constant updates and maybe request for armed navy security.

Environment
The impact on local ecosystem shall be minimized by detail environmental impact assessment and monitoring of sensitive species and areas. Emissions during production shall be as low as possible. The energy footprint of the project should be minimized by efficient design of process facilities, avoiding flaring etc. Further, materials used should meet international standards.

During drilling and operation, oil spills are the largest environmental risk. Safety procedures should constantly revised, updated and enforced. To be able to cope with possible oil spills, several scenarios are analyzed to generate quick and effective mitigation strategies, such as deployment of oil containment booms.