American oil and gas producer Chevron expects to have a final investment decision for a potentially hugely lucrative offshore and pipeline development worth more than $4 billion by the year’s end.
Total project investment by all parties for the full value chain, including four power plants, will be over $7 billion.
The company said the Block B gas project was designed to supply natural gas from Chevron’s production sharing contracts off southwest Vietnam to existing and proposed power plants in southern Vietnam.
The project includes installation of wellhead and hub platforms, a floating storage and offloading vessel, field pipelines, a living quarters platform and a central processing platform.
At last week’s meetings between US-ASEAN Business Council and Vietnam’s ministries of Foreign Affairs, Industry and Trade (MoIT) and Planning and Investment (MPI), Chevron Vietnam president Hank Tomlinson said that if the project was inked by the year’s end, it would churn out its first gas batch by 2015, per the schedule in the government’s recently-approved Power Master Plan VII.
“Chevron has been operating on this project in Vietnam since 1996 and we are working with PetroVietnam to develop Block B gas project, which has three components including offshore gas supply, construction of a 400 kilometre pipeline and construction of four power plants,” Tomlinson said.
He said the total investment capital of the entire value chain was over $7 billion, including over $4 billion for gas development and pipeline installation, and about $3 billion for constructing four power plants.
Of the capital, foreign investment contribution for the value chain would be over $4 billion, including O Mon II power plant, which will be bid out as a build-operate-transfer (BOT) project. Chevron’s share would be about $2 billion in gas development and pipeline installation. This investment would make Chevron the biggest US investor in Vietnam.
The foreign investment contribution would include Chevron, MOECO from Japan and PTTEP from Thailand.
The remaining contribution would come from PetroVietnam, Vietnam Electricity (EVN), and other investors.
He said Chevron was now finalising technical and commercial issues with PetroVietnam and would soon be ready to discuss the full cost of the project, which would contribute to the gas price. “After the costs are determined, they will be submitted to the government for approval, and an initial gas price will be agreed.”
Deputy MPI Minister Nguyen Van Trung said MPI would work with MoIT to nut out gas price solutions which could benefit investors and the government.
“The project will go a long way to providing energy supplies that Vietnam currently needs. It will increase total output of electricity in Vietnam by 17 per cent.
“This project will provide clean reliable local fuel for electricity for the next 20 years. Over the life of the project, there will be taxes, revenue and royalty generated for Vietnam amounting to more than $14 billion. Because the natural gas is the local fuel supply, it can help Vietnam avoid having to spend over $18 billion importing fuel for coal-fired power plants,” said Tomlinson.
The pipeline project completed front-end engineering and design in 2011.
Meanwhile, Chevron said exploration and analytical work continued on the blocks. In 2010, the company analysed results from past wells and finished processing seismic data and it prepared for a drilling campaign expected to start in 2012.
Chevron started investing in Vietnam in 1996.