HANOI : Vietnam expects further years-long delays before offshore blocks being developed by U.S. major Exxon Mobil and Russia’s Gazprom will be producing gas, according to a draft government document seen by Reuters.
The new timeline casts fresh doubts about prospects for the companies’ operations in the South China Sea, where Vietnam is at odds with Beijing over contested waters. Amid investor pressure to be more green-energy friendly, Exxon has for years been looking at pulling out from its Blue Whale project off Vietnam’s central coast, people familiar with the matter said.
Delays may also fuel fresh concerns about Vietnam’s power supply. The country, beset with blackouts in recent months, has laid out plans to rely on domestic gas, including gas from the Exxon and Gazprom projects, for a tenth of its power generation capacity by 2030.
The Blue Whale project calls for five power plants, with a combined capacity of nearly 4 gigawatts (GW), to be built by Vietnamese and other firms. Two of them had been due to be operational by 2024, according to plans set out by the government in 2011.
A new draft document from Vietnam’s industry ministry dated Aug. 31 said, however, that the five plants would become operational only when gas is available from that block “in 2028, tentatively”.
The document, which could become official by the end of November, also said gas sale agreements for four of them were expected to be signed this year.
None of the five plants have been built.
Exxon has been seeking buyers for the project for years, according to industry sources familiar with the matter, some of whom declined to be identified as they were not authorised to speak to media.
“We understand they have been looking for opportunities for a divestment but we are not aware of any ongoing active process at the moment,” said Andrew Harwood, research director at consultancy Wood Mackenzie.
Asked about the delayed timeframe for gas production and Exxon’s intentions towards Blue Whale, U.S.-based company spokesperson Michelle Gray said the project was progressing.
“Business activities are continuing as usual”, she added but declined further comment.
Vietnam’s industry ministry and state-owned gas company PetroVietnam, which is partnering with Exxon in the Blue Whale project, did not reply to requests for comment.
Exxon’s Vietnam unit signed the Blue Whale contract in 2009. The field is Vietnam’s largest and Exxon has estimated its gas deposits could power a city the size of Hanoi for over 20 years.
But administrative hurdles, including disagreements over how much Vietnam’s power grid operator would pay for electricity produced by plants, have delayed the development of the onshore infrastructure, according to two industry sources.
Gas extraction from the block would also have a heavier-than-usual carbon footprint that requires costly carbon capture investments, they added.
Exxon has spent $500 million on drilling and other initial costs, out of the $10 billion it had planned to invest, Harwood said. Wood Mackenzie believes any decision on final investment would not come before 2026 which would mean gas extraction could begin only in the next decade, he added.
State-controlled Gazprom is also grappling with prolonged uncertainty surrounding its main gas project in Vietnam, which involves the construction of a 0.34 GW power plant fuelled with gas it would extract from the Bao Vang field in the waters between Vietnam and China’s Hainan island.
In May, the government listed the project, which Gazprom began working on in 2000, as among those slated to be ready before the end of the decade.
The new government draft document said, however, that the plant is unlikely to come online before 2030 as Gazprom “is assessing gas reserves”.
Gazprom and the Russian embassy in Hanoi did not reply to requests for comment. PetroVietnam, which is also partnering with Gazprom, did not respond to a request for comment.
The company’s concessions in the area overlap with blocks claimed by China and for which Beijing has issued its own licences.