Chapter IV
PETROLEUM CONTRACTS
Article 26. Approval for petroleum contracts
1. After a petroleum contract is successfully negotiated, on the basis of the approved contractor selection result, PVN shall submit a report on the terms of the petroleum contract to the Ministry of Industry and Trade for appraisal and the Prime Minister for approval before PVN signs the petroleum contract.
2. Contents of petroleum contract appraisal include:
a) The validity of an application for appraisal and approval of the terms of the petroleum contract;
b) The rationality of results of negotiation of the petroleum contract;
c) The conformity of the draft petroleum contract with the approved contractor selection result and relevant laws.
3. Approval for the terms of the petroleum contract of the Prime Minister forms the basis for signing of the petroleum contract and replaces approval for investment policies for petroleum projects in accordance with the Law on Investment and the Law on Public Investment.
4. The Government shall issue regulations on documents and procedures for appraisal and approval of the petroleum contractor.
Article 27. Issuance of investment registration certificates
1. On the basis of the signed petroleum contracts, the Ministry of Industry and Trade shall issue investment registration certificates to contractors performing petroleum operations.
2. Main contents of an investment registration certificate consist of:
a) Name of the petroleum contract, oil block, petroleum project;
b) Objectives and scale;
c) Execution site;
d) Operating office;
dd) Contractors, participation interest rate, operator;
e) Minimum financial commitment of the hydrocarbon exploration phase;
g) The contractor’s financial, technical and risk responsibilities;
h) Rights of the contractor who is eligible for recovering costs obtained from the oil production according to the petroleum contract;
i) Term of the petroleum contract;
k) Effective date of the petroleum contract.
3. The Government shall issue regulations on documents and procedures for issuance of investment registration certificates.
Article 28. Amendments to terms of petroleum contracts and investment registration certificates
1. Terms of petroleum contracts shall be amended according to approvals of the Prime Minister on the basis of proposals of PVN and appraisal reports of the Ministry of Industry and Trade.
2. The Ministry of Industry and Trade shall amend the contractors’ investment registration certificates on the basis of the approved amended petroleum contracts.
3. The Government shall issue regulations on documents and procedures for appraisal and approval of amended petroleum contracts and investment registration certificates.
Article 29. Types of petroleum contracts
1. Oil and gas production sharing agreements.
2. Other types of petroleum contracts.
Article 30. Main terms of petroleum contracts
1. Main terms of an oil and gas production sharing agreement include:
a) Legal status, participating interests of contractors selected for signing the agreement;
b) Eligible entities of the agreement;
c) Area limit and schedule for return of contract area;
d) Effective date, term and phases of the agreement, conditions for extension of the phases of the agreement and amendments to the agreement and extension thereof.
dd) Rights and obligation of contracting parties and operator;
e) Minimum work obligation and minimum expenditure obligation in phases of the agreement;
g) Rules for sharing of petroleum products and determination of recoverable costs;
h) Rules for selection of contractors for provision of petroleum services and goods for petroleum operations;
i) Rights of the host country for petroleum installations and assets after cost recovery and contract termination;
k) Conditions for transfer of rights and obligation of contracting parties;
l) Rights of PVN to participate in the agreement when a commercial discovery is determined and priority over purchase of participating interests, rights and obligation assigned by the contractor in the agreement whenever possible;
m) Commitments to have commissions, training, scientific research funds and take priority over use of Vietnamese employees and services;
n) Charges for environmental protection and safety measures conducted in petroleum operations; obligation to decommission petroleum installations;
o) Requirements for termination of the agreement and handling of violations thereof;
p) Methods for settling disputes arising from the agreement and applicable law.
2. The Prime Minister shall decide main contents of other petroleum contracts suitable for specific characteristics of oil fields, groups of oil fields and blocks.
3. The Government shall issue an oil and gas production sharing agreement template.
Article 31. Duration of petroleum contracts
1. Duration of a petroleum contract shall not be over 30 years, where the hydrocarbon exploration period shall not exceed 05 years, except for the case prescribed in Clause 2 of this Article.
2. For an oil block named in the list of oil blocks to which investment incentives and special investment incentives shall be given, the duration of the petroleum contract shall not exceed 35 years, where the hydrocarbon exploration period shall not exceed 10 years.
3. Duration of a petroleum contract may be extended at the maximum of 05 years and the exploration period may be extended but the extension period shall not exceed 05 years on the basis of the approval of the Ministry of Industry and Trade, except for the case prescribed in Clause 4 of this Article.
4. For reasons of national defense and security, complicated petroleum geology conditions, particularly disadvantageous field conditions for performing petroleum operations or in case of necessity to ensure effective gas extraction period, the Prime Minister shall approve of further extension of the duration of the petroleum contract and the extension period prescribed in Clause 3 of this Article on the basis of the appraisal of the Ministry of Industry and Trade.
5. After the contractor declared that the discovery is commercial but consumer market is not found and appropriate requirements for pipelines and processing facilities are not met, the contractor may retain the discovered area. The further period in which the discovery area is retained shall not exceed 05 years on the basis of the approval for the Ministry of Industry and Trade. In case the period in which the discovery area is retained expires but consumer market is not found and appropriate requirements for pipelines and treatment facilities are not met, the Prime Minister shall consider extending the period for not exceeding 02 years on the basis of the appraisal of the Ministry of Industry and Trade. During the further period, the contractor must perform works committed in the petroleum contract.
6. In case of force majeure that contracting parties consents to temporarily relinquish exercise of several rights and obligation mentioned in the petroleum contract, PVN shall send a report to the Ministry of Industry and Trade for decision. The period in which several rights and obligation stated in the petroleum contract are temporarily relinquished due to force majeure shall be calculated from the beginning to the end of this force majeure.
7. The period in which several rights and obligation stated in the petroleum contract are temporarily relinquished shall be decided by the Government according to the proposal of the competent authority for national defense and security reasons.
8. The extension period of hydrocarbon exploration, the period in which the discovery area that is declared a commercial discovery is retained and the period in which several rights and obligation stated in the petroleum contract are temporarily relinquished due to force majeure or for the national defense and security reasons shall not be included in the duration of the petroleum contract.
9. The Government shall issue regulations on documents and procedures for extension of the duration of the petroleum contract and extension of the exploration period, and decide the period in which the discovery area is retained and the period in which several rights and obligation stated in the petroleum contract are temporarily relinquished due to force majeure or for the national defense and security reasons.
Article 32. Petroleum contract area, return and extension thereof as well as consolidation of discovery of petroleum and oil and gas fields
1. A petroleum contract area includes the area of one or more oil blocks prescribed in the petroleum contract.
2. The contractor shall be responsible for partial return of the contract area in the end of each part of the exploration period and decommissioning of petroleum installations involved in the returnable contract area as prescribed in this Law and other related laws.
3. The contractor has the right to submit a proposal to retain all the contract area or a proposal to temporarily relinquish the obligation to return the contract area in case the contractor submitted the proposal to continue to carry out hydrocarbon exploration and quantification of some potential structures involved in the contract area to be returned on the basis of the approval of the Ministry of Industry and Trade.
4. In case of discovery of commercial hydrocarbons and an oil and gas field encroaches on the area of the adjacent available oil block, the contractor may submit a proposal for extension of the petroleum contract area.
5. In case of discovery of commercial hydrocarbons and an oil and gas field encroaches on the area of one or more adjacent oil blocks for which the petroleum contract has been signed, contractors shall be permitted to propose consolidation of these fields for simultaneous quantification and development for the purpose of improving economic efficiency and optimally exploiting oil and gas resources.
6. The contractor shall submit the proposal for extension of the contract area and consolidation of discovery of petroleum and oil and gas fields for simultaneous quantification as well as development to PVN for consideration, report it to the Ministry of Industry and Trade for appraisal and submit it to the Prime Minister for approval.
7. In case of necessity to construct works and equipment outside the petroleum contract area in service of extraction, refining and transport of petroleum obtained from the contract area, the contractor shall be permitted to propose it in the outline field development plan (ODP), an early field development plan (EDP) (if any) and oil and gas field development plan, submit it for appraisal and approval as prescribed in Articles 46, 47 and 48 hereof.
8. The Government shall issue regulations on documents and procedures for submission, appraisal and approval of the proposal for retention or temporary relinquishment of exercising obligation to return and extend the contract area and consolidation of discovery of petroleum and oil and gas fields.
Article 33. Cost recovery in petroleum contracts
Contracting parties may enter into an agreement on cost recovery of the contractor in the petroleum contract according to the following regulations:
1. The oil production obtained in a year shall not exceed 50% in terms of petroleum contracts for normal oil blocks;
2. The oil production obtained in a year shall not exceed 70% in terms of petroleum contracts for oil blocks and fields to which investment incentives shall be given;
3. The oil production obtained in a year shall not exceed 80% in terms of petroleum contracts for oil blocks and fields to which special investment incentives shall be given.
Article 34. Languages employed in petroleum contracts
Vietnamese and English or another common foreign language shall be employed in petroleum contracts and enclosed documents of the contracts agreed upon by the parties. Vietnamese and English or another common foreign language shall be of equal value.
Article 35. Termination of petroleum contracts
1. A petroleum contract shall be terminated according to the term prescribed in the contract or when the duration of the contract ends but the contract is not renewed according to Clause 3 and Clause 4 Article 31 of this Law.
2. A petroleum contract shall be terminated prior to the term agreed upon by the parties if they fulfilled their agreed obligation and no
Article 36. Transfer of participating interests, rights and obligations of contractors under petroleum contracts
1. Contractor may transfer his/her participating interests and his/her rights and obligations under the petroleum contract. The entire or partial transfer of the participating interests, rights and obligations of the contractor under the petroleum contract must comply with the following requirements:
a) The transferee must undertake to succeed participating interests, rights and obligation of the transferor and fulfill all terms of the petroleum contract;
b) The transferor and transferee must comply with the requirements according to this Law and other related laws;
c) The transferor must pay tax, fees and charges related to the transfer as prescribed by law on tax, fees and charges and other related laws.
2. The transfer of the participating interests, rights and obligation of the contractor under the petroleum contract shall be approved by the Prime Minister on the basis of the appraisal of the Ministry of Industry and Trade and come into force as prescribed in the amended investment registration certificate.
3. The Government shall issue regulations on documents and procedures for submission, appraisal and approval of the transfer of the participating interests, rights and obligation of the contractor under the petroleum contract.
Article 37. Methods for settling disputes arising from petroleum contracts
Disputes arising from a petroleum contract must first be resolved by consultation and negotiation. In the event that no agreement is reached, these disputes may be settled through arbitration or court proceedings prescribed in the petroleum contract in accordance with the Law on Investment and other related laws.
Article 38. Operating offices of foreign operators in petroleum contracts
1. Foreign operators must establish operating offices in Vietnam to execute petroleum contracts. The operating offices must have their seals, accounts and must be permitted to recruit employees and fulfill rights and obligations within the authorization prescribed in the petroleum contracts and operating agreements of contractors and under Vietnamese laws.
2. A foreign operator may use an operating office in Vietnam for management of petroleum operations of one or multiple petroleum contracts in Vietnam. Management costs for each petroleum contract must be separately allocated and entered in the accounts.
3. In case of change of operating office address or change of the head of operating office or receipt of operating office due to change of the operator, the operator must send a written notice to an investment registration agency where the operating office is located.
4. Upon termination of operating office’s operations, the operator must send a notice of termination to an investment registration agency where the operating office is located.
5. The Government shall issue regulations on documents and procedures for establishment and termination of operating office’s operations and change for the cases prescribed in Clause 3 of this Article.
Article 39. Exercise of participating interests, priority over purchase of participating interests, and receipt of participating interests in petroleum contracts
1. PVN shall be permitted to exercise participating interests in petroleum contracts; priority over partial or whole purchase of participating interests that contractors intended to assign in signed petroleum contracts, on the basis of transfer conditions agreed upon between intentional transferors and potential transferees.
2. PVN shall be permitted to fully receive transfer of existing participating interests, data and petroleum installations of a contractor in case the contractor decide to withdraw from the petroleum contract for the special reasons approved by the Prime Minister.
3. PVN shall submit a report on the exercise of participating interests, priority over purchase of participating interests and full receipt of transfer of participating interests of the contractor stated in the petroleum contract to the Ministry of Industry and Trade for appraisal and submit the report to the Prime Minister for consideration.
4. The Government shall issue regulations on documents and procedures for submission, appraisal and approval of the enjoyment of participating interests, priority over purchase of participating interests and full receipt of transfer of participating interests of the contractor stated in the petroleum contract; mechanisim for management, monitoring, use, settlement of assets and receipt of transfer of participating interests from the contractor for the special reasons.
Article 40. Proposals for additional investment plans, signing of new petroleum contracts before the applicable petroleum contracts expire
1. At least 02 years before ending duration of a petroleum contract, the contractor shall be permitted to propose a plan for additional investment in order to increase petroleum reserves, improve petroleum recovery factors and petroleum extraction in the same contract area with appropriate economic and technical conditions to sign a new petroleum contract after the current petroleum contract expires.
2. On the basis of a proposal of a contractor who is under a petroleum contract, PVN shall submit a report on the appointment of the contractor for signing of a new petroleum contract according to the regulations in Point c Clauses 1 and 2 Article 21 of this Law to the Ministry of Industry and Trade for appraisal, submit it to the Prime Minister for consideration.
3. The contractor signing the new petroleum contract shall be permitted to continue to use without payment for use of information, data, samples and petroleum installations and other assets which have been installed and invested in the same contract area for carrying out petroleum operations under the new petroleum contract in the event that the case in which the contractor is not subject to such payment is involved in the determination of interests of the host country in the new petroleum contract.
Article 41. Receipt of oil fields, groups of oil fields and blocks from contractors upon expiration of petroleum contracts
1. At least 02 years before a petroleum contract expires, PVN shall submit a report on the follow-up plan for handling of oil fields, groups of oil fields and oil blocks being exploited at the petroleum contract area to the Ministry of Industry and Trade of Vietnam.
2. At least 06 months before ending duration of the petroleum contract and no new contract is signed under regulations in Article 40 hereof, PVN shall submit a report on the follow-up plan for handling of oil fields, groups of oil fields and oil blocks according to one of the following methods to the Ministry of Industry and Trade for appraisal and submit it to the Prime Minister for approval:
a) Do not continue to exploit oil fields, groups of oil fields and blocks;
b) Continue to exploit oil fields, groups of oil fields and blocks on the basis of a new petroleum contract in the appropriate economic and technical conditions. In this case, the contractor signing the new petroleum contract shall be permitted to use information, data, samples, petroleum installations and other assets which have been installed and invested in the same contract area according to the regulations in Clause 3 Article 40 hereof;
c) Assign PVN to salvage all oil fields, groups of oil fields and blocks.
3. If oil fields, groups of oil fields and oil blocks are allowed to continue exploiting according to the regulations in Point b Clause 2 of this Article, from the date a petroleum contract expires, PVN shall receive such oil fields, groups of oil fields and oil blocks from the contractor in their status quo and carry out petroleum operations under the financial mechanism stated in the approved handling plan to the date on which a new petroleum contract is signed but the duration does not exceed 02 years. After 02 years from the date on which PVN receives oil fields, groups of oil fields and blocks but no contractor expresses interest in or is eligible for signing of the new petroleum contract, PVN shall submit a report on a follow-up plan for handling of such oil fields, groups of oil fields and blocks according to one of the following methods to the Ministry of Industry and Trade for appraisal and submit it to the Prime Minister for approval:
a) Do not continue to salvage oil fields, groups of oil fields and blocks;
b) Assign PVN to salvage all oil fields, groups of oil fields and blocks.
4. The Government of Vietnam shall issue regulations on documents and procedures for appraisal and approval of the follow-up plan for handling of such oil fields, groups of oil fields and blocks, contents of the handling plan; the financial mechanism until the date on which the new petroleum contract is signed.
5. The operating mechanism of salvage of oil fields, groups of oil fields and blocks prescribed in Point c Clause 2 and Point b Clause 3 of this Article shall be decided by the Government of Vietnam.
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