Vietnam Oil & Gas Report Q1 2011

Dec 27, 2010 – The latest Vietnam Oil & Gas Report from BMI forecasts that the country will

account for 1.59% of Asia Pacific regional oil demand by 2015, while providing 4.11% of

supply.

Regional oil use of 21.42mn barrels per day (b/d) in 2001 will reach an estimated 27.11mn b/d in

2010, then rises to around 30.64mn b/d by 2015.

Regional oil production was around 8.35mn b/d in 2001, and will average an estimated 8.91mn

b/d in 2010. It is set to decrease slightly to 8.89mn b/d by 2015.

Oil imports are growing rapidly, because demand growth is outstripping the pace of supply

expansion.

In 2001, the region was importing an average of 13.07mn b/d. This total will rise to an estimated

18.20mn b/d in 2010, and is forecast to reach 21.75mn b/d by 2015. The principal importers will

be China, Japan, India and South Korea. By 2015 the only net exporter will be Malaysia.

In terms of natural gas, in 2010 the region is expected to consume 489bn cubic metres (bcm) and

demand of 633bcm is targeted for 2015. Production of an estimated 412bcm in 2010 should

reach 548bcm in 2015, implying net imports rising from around 77bcm to 84bcm. This is thanks

to many Asian gas producers being major exporters. Vietnam's estimated share of gas

consumption in 2010 is 1.87%, while its share of production is put at 2.22%. By 2015, its share

of gas consumption is forecast to be 2.85%, with the country accounting for 4.01% of supply.

For 2011, there is considerable oil demand and oil price uncertainty, but still a very strong

possibility that oil will trend higher. Economic growth may have been subdued late in 2010 and

into early 2011, but should still support meaningful oil demand increases. Non-OPEC supply is

likely to emerge only slightly higher so, with continued OPEC discipline, the foundations have

been laid for an oil price rise - albeit falling well short of the improvement seen this year. It

seems likely that the 2010 average OPEC basket price will have emerged around the US$77.00

per barrel (bbl) level, representing a year-on-year (y-o-y) gain of approximately 27%. Progress

towards at least US$80 is seen as achievable in 2011.

Vietnamese real GDP growth in 2010 is forecast by BMI at 6.0%, with a forecast average annual

6.5% increase in 2010 to 2015. Exploration success has been on the rise in Vietnam, with a

growing number of international oil companies (IOCs) teaming up with PetroVietnam and

finding and developing hydrocarbon resources - particularly gas. We are assuming that oil and

gas liquids production will have peaked at 400,000b/d in 2010, before easing back to 365,000b/d

by 2015. Beyond 2009, consumption is forecast to increase by around 5-7% per annum to 2015,

implying demand of 488,000b/d by the end of the forecast period. Gas production is forecast to

increase from the estimated 2010 figure of 9.1bcm to 22.0bcm by 2015 - providing the basis for

exports.

Between 2010 and 2020, we are forecasting a decline in Vietnamese oil production of 22.50%,

with crude volumes peaking at 400,000b/d in 2010, before slipping to 310,000b/d by 2020. Oil

consumption between 2010 and 2020 is set to increase by 78.22%, with growth beyond 2009

ranging from 5.0% to 7.0% per annum and the country using 662,000 b/d by 2020. Gas

production is expected to rise from an estimated 9.1bcm in 2010 to 25.0bcm in 2020. With 206%

demand growth, we see potential for exports midway through the period to turn into modest

imports by the end of the period. Details of BMI's 10-year forecasts which provide regional and

country-specific projections, can be found at the end of this report.

Vietnam takes fourth place, behind China, in BMI's composite Business Environment (BE)

league table, which reflects largely its strong upstream position. The country holds third place,

behind India, in BMI's updated upstream Business Environment ratings, with its ranking

reflecting a reasonable resource position, better-than-average growth outlook, attractive licensing

terms and an IOC-friendly competitive environment. There is a one-point gap between Vietnam

and fourth-placed Malaysia, but we believe Vietnam is safe from any near-term challenges.

Vietnam now shares ninth place with Pakistan in BMI's downstream Business Environment

ratings, reflecting its modest (but growing) refining capacity, above average oil and gas demand

growth outlook, and low level of retail site intensity.