Law revision needed for oil and gas industry development

08:50 | 26/08/2019 Industry

(VEN) - The oil and gas industry meets about 40 percent of Vietnam’s primary energy demand and plays a crucial role in the country’s national energy security. However, the sector is facing difficulties due to regulations and policies that no longer satisfy its actual development demands.

law revision needed for oil and gas industry development

Problems

Speaking at a recent scientific conference themed “Ensuring national energy security - The role of the oil and gas industry” in Hanoi, Tran Sy Thanh, Deputy Head of the Central Economic Commission said that despite concrete targets set by the Politburo in 2015, no policies or solutions have been devised to realize the targets.

Thanh, who also serves as Chairman of the PVN (Vietnam National Oil and Gas Group) Members Council said capital that the oil and gas industry annually attracts from outside investors has decreased from US$2 billion to several hundred million US dollars. Particularly, PVN’s parent company financial policy has not been approved so it is easy to take risks.

Besides, financial mechanisms for oil and gas drilling activities remain problematic and overlap. According to the Law on Water Resources Tax, companies have to pay tax worth VND100 million for each square kilometer of sea surface under which they drill oil and gas, a high rate that discourages investors.

Nguyen Hong Minh, Deputy Director of the Vietnam Petroleum Institute (VPI) said the oil and gas-drilling sector is facing difficulties in attracting foreign investment because existing policies no longer meet the actual development demands.

Petroleum Law amendment needed

Former Minister of Trade Truong Dinh Tuyen said the Petroleum Law must be amended to not only attract investment to the oil and gas industry and provide more specific regulations on state oil and gas management agencies, but also to solve problems related to administrative procedures and abolish some negative tax policies.

VPI Deputy Director Nguyen Hong Minh predicted the oil and gas industry would need investment capital of US$13-14 billion in the 2019-2025 period but no policy on mobilizing that capital has been adopted. Therefore, along with revision of the Petroleum Law, the state should consider appropriate financial mechanisms to mobilize investment capital.

A national energy reserve must be built to confront urgent cases of energy shortages and at the same time it is necessary to promote search and exploration of energy resources to minimize dependence on outside sources.

Energy demand is forecast to grow 5.1 and 4.2 percent per year in the 2016-2025 period and the 2026-2035 period,

respectively. Along with coal and hydropower, oil and gas are vital for ensuring the stability of production, trade and

people’s lives.

Hoang Chau