Chevron and PetroVietnam Near Agreement on $7 Billion Gas and Power Project

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources ( Sugar Land, Texas)--Negotiations between Chevron (NYSE:CVX) (San Ramon, California) and Vietnam Oil and Gas Group (PetroVietnam) (Hanoi, Vietnam) regarding a gas and power project this year have made good progress. Vietnam government sources say that an agreement could be reached by late September on a $7 billion project that will cover a gas pipeline and three gas-fired power plants that would be scheduled to begin operations in 2015.

Chevron is currently the operator of two natural gas production-sharing contracts (PSCs) in Vietnam in the Malay Basin, off the coast of southwest Vietnam. Chevron has a 42.4% interest in a PSC that includes Blocks B and 48/95. The Vietnam Block B gas project is designed to supply natural gas from the company's PSCs in the Malay Basin to existing and proposed power plants in southern Vietnam.

In a May statement Chevron reported that the scope of the project at that date included installation of wellhead and hub platforms, a floating storage and offloading vessel, field pipelines, a living-quarters platform and a central processing platform. The targeted maximum daily production was 490 million cubic feet of natural gas, and the expected total investment for the offshore development and pipeline project was more than $4 billion.

Chevron completed front-end engineering design (FEED) work this year. The company also reported that it had a 28.7% non-operated working interest in a pipeline project that will deliver natural gas from the development to the utility companies in southern Vietnam. The pipeline project received its business license in 2010, and FEED work was completed this year.

The latest brief announcement made by a Chevron spokesman at a meeting between Vietnam's National Committee for Financial Supervision and the U.S.-ASEAN Council in Hanoi, said that the companies will build a 400-kilometer gas pipeline and three gas-fired plants which were scheduled to begin operations in 2015.

As announced, in the total $7 billion scope of the project, PetroVietnam will probably invest $3 billion, and Chevron will invest $2 billion. The $2 billion balance will be funded by foreign sources.

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