Vietnam is known as a rich country with natural resources. The energy industry of Vietnam has developed for a number of years but the lack of modern technology and capital that makes Vietnam has still stalled in this potential field. By the strength of resources, cheap labor, and transport, Vietnam is attracting many foreign investors to invest in the energy industry. Our energy and resources lawyers in Vietnam always monitor the legal environment and keep our client posted to changes that could impact their business.
In particular, Vietnam has considerable supplies of oil, natural gas and refineries. Proven oil reserves in Vietnam amount to 3.3 billion barrels as the second-most in Southeast Asia, after Indonesia. Revenues from oil and gas contribute about 30% of Vietnam’s GDP. Vietnam Oil and Gas Group (PetroVietnam), a state-owned company is eligible to conduct petroleum activities, sign cooperation contracts and govern petroleum industry in Vietnam.
For exploration and production, sea zones in Vietnam are divided into different geographic “blocks” based on the advice of PetroVietnam. The size and scope of these blocks can vary from year to year, depending on the scale of the activities undertaken by the company currently assigned to it. According to Law on Petroleum 1993, amending in 2000 and 2008, to participate in this field, the investors have to join the bidding for researching and exploiting petroleum. In special cases, the Vietnam Government may appoint the contractor to select investors wishing to engage in petroleum. Then the investor must enter into a dividing product or joint venture or other contract which contents all terms as required by Article 15 (amended), managed by the Vietnam Government. This contract’s term shall not exceed 25 years in which period of research and exploration not exceed 5 years. The duration may be extended 5 years for the contract and 2 year for period of research and exploration. In case projects are encouraged to invest in petroleum and exploring natural gas, the term can be 30 years and 7 years for a period of research and exploration.
Taxation for petroleum activities is based on the type of natural resources exploited, economic, technical conditions of the mines, the amount produced. According to law on Petroleum and other provisions on taxation, the natural resources tax rate is from 4% to 25% for crude oil, 0% to 10% for natural gas. To ensure the reserve aiming to domestic demand, Vietnam has regulated export rate for natural resources, especially tax rate at 20% for crude oil and coal. This regulation was implemented to encourage companies in Vietnam to refine crude oil in the country as the new refineries come online.
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