Wednesday, March 26, 2008

New Vietnam wells show more natural gas -Chevron

By Annika Breidthardt

SINGAPORE, March 25 (Reuters) - U.S. energy major Chevron has found more natural gas at its Vietnam offshore field, likely boosting the over $4 billion project's resource base, as the Southeast Asian country is grappling with growing power demand.

Hank Tomlinson, Chevron Corp's (CVX.N: Quote, Profile, Research) country manager for Vietnam, told Reuters he hoped to conclude talks with state-owned PetroVietnam on selling the gas in first-half 2008.

An agreement is needed to keep the project on track to meet a 2012 target for first production, a goal that has slipped once due to ongoing negotiations.

"The joint venture partners believe that the in-place gas for the development is in excess of 5 trillion cubic feet of natural gas," Tomlinson said in a telephone interview.

That is up from previous Vietnamese government estimates that put the resources at the development of block B, 48/95 and 52/97 at up to 4 trillion cubic feet (tcf), or 16 percent of the country's total reserves.

The resource base could grow as a result of two successful wells drilled several weeks ago.

Chevron, which holds a 43 percent stake in the offshore development off the southwest coast of Vietnam, drilled one well inside the current development area to find there were large quantities of additional gas resources deeper in the reservoir than previously verified.

It also drilled an exploration well outside the development area that confirmed additional hydrocarbon potential in a new trend in block B and 48/95.

The latest drilling results could raise total in-place gas resources for the combined blocks to more than 6 tcf.

Tomlinson said Chevron did not plan any further drilling until it could resolve commercial terms.

He declined to give an estimate on the size of the commercially recoverable reserves, which are normally much smaller than in-place estimates.

The increase comes as Vietnam is struggling to generate enough power to fuel surging economic growth, forcing it to import electricity, open the sector to foreign investment and burn more of its coal and imported fuel to meet demand.

Demand in Vietnam, a country used to frequent power outages, is expected to grow by 15.8 percent to 80 billion kilowatt hours this year.

Chevron already has other projects in Asia. It said earlier this month it planned to develop a $3.1 billion project in Thailand, Platong Gas 2.

It operates an already existing gas project in Bangladesh, and is working on other projects in Indonesia and China.

COMMERCIAL TALKS

Chevron was still in commercial talks with the Vietnamese government to agree, among other issues, the price at which it will sell its gas and taking more equity stakes, Tomlinson said, adding the company targeted an agreement this year.

Chevron is considering taking stakes in all three parts of the integrated gas development -- from exploration to power plants -- to ensure the project gets the go-ahead and to secure an outlet for its gas.

Such a deal would break with Chevron's usual reluctance to invest outside its core exploration and production areas, but would not be a first for Chevron or other majors.

In Thailand, Chevron, the largest gas producer in that country, holds a stake in the 700-megawatt TriEnergy power plant. BP (BP.L: Quote, Profile, Research) is considering a similar move in Vietnam.

The lack of infrastructure in many developing countries, especially for gas, is encouraging upstream firms to secure a market for their resources by investing in power plants and other downstream facilities.

The project should produce more than 500 million cubic feet a day of gas at full production, expected to be reached within five to seven years after start up, Tomlinson said.

That would represent about 70 percent of Vietnam's natural gas production in February, government figures show.

The project will cost about $4.3 billion, including the offshore part and the pipeline to the power complex, not the power plant itself, Tomlinson said. Engineering and construction costs for upstream projects have risen significantly over the past few years in line with rising costs for labour and steel. (Editing by Ramthan Hussain)