HISTORY OF OIL & GAS EXPLORATION IN THE GULF OF TONKIN
For purposes of future exploration, PetroVietnam, the Vietnamese Government Oil and Gas Corporation, divided the prospect areas within the Song Hong Basin in the Gulf of Tonkin into several blocks. A separate map shows the locations of Blocks 101, 102, 103, 106 and 107 as figure 1. An intensive drilling program was implemented during the late 1970s and presently continues at an onshore area west of Blocks 102 & 106. Oil and gas were discovered in several of these wells. A gas field was discovered at Tien Hai in 1975 and is still in operation. There have been several other discovery fields in this area operated by Anzoil, an Australian oil & gas company. From 1988 through 1992, TOTAL (a French company) possessed a Production Sharing Contract (PSC) with PV for operations in Blocks 103 and 107. They were also allowed to collect and evaluate data in Blocks 102 and 106. TOTAL initiated offshore exploration operations in 1990 in Blocks 102, 103 and 106. At this time, five exploration wells have been drilled in the offshore portion of this basin to assess the hydrocarbon potential of the Miocene section. TOTAL’s 103-TH-1X well tested gas at rates reported at 1.86 MMscf/d and 80 bbl/d of condensate (2925-2939 m) and 3.75 MMscf/d with 29.5 bbl/d of condensate and water (2293-2297m) from Miocene deltaic sandstone. As a result of promising data attained in Blocks 106, TOTAL requested that PV allow them to include Block 106 in their PSC. When PV rejected their request, TOTAL terminated their exploration operations.
From 1992 through 1994, Indemitsu (a Japanese company) possessed a PSC for operations in Blocks 102 and 103 with the right to explore data in Block 106. Indemitsu later drilled three wells in Block 102 on the up-dip trend of the TOTAL gas discoveries and encountered gas and oil traces during drilling from the cuttings, sidewall core and core samples. These findings were not considered significant and the wells were sealed and abandoned. They concluded that Block 106 was the area of highest economic potential. When PV would not allow them to develop Block 106, they too terminated their operations.
As a result of exploration operations performed by TOTAL and Idemitsu, a very detailed mapping of prospect areas within the Blocks was developed. It also was determined that an imaginary line intersecting Blocks 102, 106, and 107 could be drawn, above which the prospect of discovering oil is highest and below which the prospect of gas is highest. The named prospects for oil include Tien Lang, Chi Linh, and Yen Tu in Block 106 and the prospects for gas include Bach Long in Block 106, Hong Long, Hoang Long, Hac Long, and several other unnamed prospects within Block 103. The later group of gas prospects is commonly known as the Dragon Group. This group is estimated to have a potential for 2 Trillion Cubic Feet (TCF) of natural gas. The Bach Long prospect in Block 106 is estimated to have over half of this capacity. These prospects are identified in a separate map as Figure 2. Figure 2 also shows the Tien Hai Field south of Hai Phong operated by PV and the Weizhou Field northeast of Block 106 operated by the Chinese, both of which are currently producing oil & gas.
From 1994 through 1999, PV continued analysis of the geological and geophysical data, which was turned over by the TOATL and Idemitsu. They carried on the exploration of this region themselves, utilizing their exploration and drilling services subsidiary, PetroVietnam Services Company (PVSC). Through extensive data refinement and analysis, PVSC determined that the Yen Tu prospect within Block 106 had the highest potential for oil development and quick economic recovery. PVSC selected precise drilling locations, fully developed their drilling program, and were ready to implement. However, in 1997 the Southeast Asian financial market took a major downturn and PV’s executive management reconsidered their drilling plans. As a result, in late 1997 PV decided to competitively bid for exploration services under a PSC and began actively soliciting international companies.
In July 1998, PV released a Request for Proposal (RFP) for the exploration of Blocks 102 and 106. Shortly afterwards, the Prime Minister and other high ranking government officials decided that, due to the major investment already made by PV in identifying well drilling locations, it was in the country’s best interest to develop these prospects themselves. However, since the RFP had already hit the international market, these government officials eventually decided that it was too late to retract. ATI submitted a proposal, along with several large international petroleum explorations firms. During the bid process, PVSC continued to refine exploration data for prospects within the Dragon Group. This was done as part of a governmental strategy to tap into gas reserves within these prospects and pipe the gas inland to supply energy for the 40+ million citizens in the Red River Delta region. PVSC inadvertently refined data and developed a well location in an area of the Bach Long prospect that is in Block 106. PV attempted to redraw the boundaries of Block 106 to exclude the Bach Long prospect, however, ATI successfully protested this move directly to the Prime Minister. PV selected ATI in September 1999 and the PSC between ATI and PV was negotiated and signed on January 28, 2000.
In February of 2000, ATI developed its plans and budgets and began exploration operations. In May 2000, a Technical Assistance Agreement (TAA) was signed with PVSC for their assistance in maximizing the benefit of their previous work and minimizing cost to ATI.
PV is currently operating in Block 103 adjacent to ATI’s Blocks. In May 2000, PVSC struck 7 major natural gas layers within 2500 to 3500 meters of drilling depth within the Hong Long prospect of Block 103. This strike is directly adjacent to ATI’s Bach Long prospect in Block 106. In addition to the significant gas layers, this well possesses tremendous pressure and is predicted as a long-term producer. As a result of this strike, PV and the Vietnam government have accelerated their efforts to construct a pipeline from the Dragon Group prospects to Tien Hai.
PV is also encouraging ATI to develop the Bach Long prospect first since it is estimated at a potential for over 1 TCF of natural gas.
