Vietnam’s oil industry has mixed outlook

Outlook

Vietnam’s Nghi Son refinery may be fully operational by August, enabling the country to meet 70% of its fuel demand.

While the oil industry’s downstream sector appears set to receive a boost, the upstream sector is encountering difficulties. Beijing twice in the last year has forced Hanoi to stop offshore drilling projects in the South China Sea with the Spanish energy firm Repsol. China last month expressed concern over exploration by the Vietnamese unit of Russia’s Rosneft.

Vietnam may reduce its dependence on refined petroleum imports, but it may struggle to increase crude oil production.

Impacts

• Hanoi will resist Beijing’s efforts to encourage joint development of hydrocarbon resources in the South China Sea.
• Vietnam’s refined petroleum exports will increase while its crude oil exports will decrease.
• Crude oil imports will increase, with the Nghi Son refinery mainly processing supplies from Kuwait.
• Prospective investors in Vietnam’s oil industry may be concerned over high-profile contract terminations.
• Conversely, convictions against former PetroVietnam executives may provide reassurance about effective anti-corruption measures.