SOCIALIST REPUBLIC OF VIET NAM
Hanoi, September 12, 2000
DETAILING THE IMPLEMENTATION OF THE PETROLEUM LAW
Pursuant to the September 30, 1992 Law on Organization of the Government;
Pursuant to the Petroleum Law of July 6, 1993;
Pursuant to the June 9, 2000 Law Amending and Supplementing a number of Articles of the Petroleum Law;
At the proposal of the Minister-Director of the Government’s Office,
Article 1.- Scope of regulation
This Decree details the implementation of the Petroleum Law passed on July 6, 1993 by the ninth National Assembly of the Socialist Republic of Vietnam and the Law Amending and Supplementing a Number of Articles of the Petroleum Law passed on June 9, 2000 by the tenth National Assembly of the Socialist Republic of Vietnam (hereinafter referred collectively to as the Petroleum Law).
Article 2.- Objects of application
This Decree shall apply to the activities of prospecting and exploring oil and gas, developing oil and gas fields and exploiting oil and gas, including processing, gathering, storing and transporting oil and gas from the exploitation areas to the places of delivery and the petroleum service activities in the inland, islands, inland waters, territorial waters, exclusive economic zones and continental shelf of the Socialist Republic of Vietnam, as well as on projects, means and facilities in service of petroleum activities as provided for in Article 47 of the Petroleum Law.
Article 3.- Subjects entitled to carry out petroleum activities
Organizations and individuals entitled to carry out petroleum activities shall include:
1. Vietnam Oil and Gas Corporation;
2. Other State enterprises set up under the Law on State Enterprises;
3. Enterprises set up under the Enterprises Law;
4. Foreign-invested enterprises in Vietnam;
5. Foreign organizations and individuals making direct investments in Vietnam;
6. Overseas Vietnamese making investments in Vietnam.
Organizations and individuals defined in Clauses 2, 3, 4, 5 and 6 of this Article may conduct petroleum activities on the basis of petroleum contracts signed with the Vietnam Oil and Gas Corporation.
Where petroleum activities are carried out arbitrarily, the Vietnam Oil and Gas Corporation shall have to draw up plans to submit them to the Prime Minister for approval and have to abide by the provisions of the Petroleum Law, the State Enterprises Law, this Decree as well as other relevant provisions of Vietnamese laws.
Article 4.- Term definition
In this Decree, the following terms shall be understood as follows:
1. "Fixed works" are works built and installed fixedly and used in service of petroleum activities.
2. "Contractual area" is the area determined on the basis of prospection and exploration lots as agreed upon in the petroleum contracts or the remaining area after the return of area.
3. "Place of delivery" is the place agreed upon in the petroleum contract, where the oil and gas ownership is transferred to parties to the petroleum contract.
4. "Fair transaction contract" is the transaction contract between the buyer and the seller in the market relationship, excluding internal sale and purchase contracts of a company, between Governments, between Governmental organizations, or any transaction and exchange affected by irregular trade relations.
5. "Accompanied gas" is hydrocarbon in gaseous form, which is separated in the course of crude oil exploitation and processing.
6. "Field development" is the process of preparing and investing in the project construction, exploitation drilling, equipment installation in order to put oil and gas fields into exploitation as from the time such fields are declared having commercial value.
7. "Net oil and gas output" is the output of oil and gas exploited and retained from the contractual area and measured at the place of delivery.
Article 5.- Work plans and programs
1. Organizations and individuals, when conducting oil and gas prospection, exploration and exploitation activities must draw up general plans, detailed plans for such activities, and submit them to the oil and gas State management body for consideration and approval.
The time limit for consideration and approval shall not exceed sixty (60) days for a general plan and thirty (30) days for detailed plan from the date of receiving such plans.
2. Organizations and individuals, when conducting oil and gas prospection, exploration and exploitation activities, shall have to draw up yearly working plan corresponding to each period in conformity with the commitments in the petroleum contracts regarding the time limit, work contents, financing, and send them to the Vietnam Oil and Gas Corporation for agreement on the implementation thereof.
Article 6.- Applicable criteria
Organizations and individuals, when conducting petroleum activities, shall have to apply Vietnamese criteria on safety, environment, relevant techniques and technologies.
Where the Vietnamese criteria are not available, the organizations and individuals carrying out petroleum activities may apply the criteria defined in the international agreements which Vietnam has acceded to or signed.
The application of other criteria must be permitted by the Ministry of Science, Technology and Environment.
Article 7.- Documents on environment and safety
Organizations and individuals, before conducting oil and gas prospection, exploration and exploitation activities, shall have to compile and submit to the competent State bodies the following documents:
- The report on assessment of environmental impacts;
- The safety control program and the evaluation of risks enclosed with measures to limit incidents and damage;
- The contingency plans, including technical solutions and the use of means and equipment to overcome incidents.
Article 8.- Requirements on environment protection and safety
Organizations and individuals conducting oil and gas prospection, exploration and exploitation activities shall have to perform the following tasks to protect the environment and ensure the safety:
1. Setting up safety zones and maintain safety signals for petroleum projects and machinery as well as equipment as provided for in Article 11 of this Decree;
2. Applying measures to ensure safety according to the approved safety control program;
3. Implementing programs for observation of environmental changes, realizing environment protection plans and measures in order to prevent pollution and overcome consequences of incidents which caused environmental pollution according to the provisions of the environment protection legislation;
4. Minimizing adverse or bad impacts on environment such as soil, water, forest and/or air pollution, causing harms to the flora and fauna systems, causing ecological imbalance or badly affecting the living environment of people;
5. Updating data and finalizing the report on evaluation of risks, the report on implementation of contingency plans;
6. Fully recording incidents and accidents which have occurred;
7. Issuing emergency notices and promptly applying remedial measures in case of accidents or incidents;
8. Applying measures to ensure labor safety.
Article 9.- Responsibilities when incidents occur
Organizations and individuals conducting petroleum activities shall be held responsible before law for the human, material and environmental damage as well as for cleaning up and restoring the environment which has been directly or indirectly affected by petroleum activities.
Article 10.- Requirements on natural resources preservation
Organizations and individuals conducting oil and gas prospection, exploration and exploitation activities must abide by the regulations on preservation of natural resources as well as oil and gas resources and exploit oil and gas with the optimum recovery coefficients suitable to international practices in the oil and gas industry.
Article 11.- Oil and gas safety zones
The distance of safety zone for drilling and exploiting works on the sea is five hundred meters (500m) outwards from the outmost edge of the works or from the anchoring position for floating facilities, except for special cases decided by the Prime Minister. Within two (2) nautical miles from the outmost edge of the works, means and vessels are not allowed to anchor. Persons who have no responsibility are not allowed to infiltrate into the safety zones, except for special cases to be decided by the Prime Minister.
The safety zone around the oil and gas prospection, exploration and exploitation works on land shall be defined by the oil and gas State management body, depending on the geographical and social conditions of the places where petroleum activities are carried out.
Article 12.- Regulations on drilling
While conducting the drillings, organizations and individuals shall have to observe the following regulations:
1. Drilling according to designs or altered designs which have already been approved;
2. Not to carry out drillings outside the contractual areas;
3. Keeping all documents and specimen collected in the course of drilling and submit them to the Vietnam Oil and Gas Corporation;
4. Promptly notifying Vietnam Oil and Gas Corporation of other natural resources discovered while drilling.
Organizations and individuals conducting petroleum activities shall also have to abide by other provisions of the current regulations.
Article 13.- Regulations on oil and gas exploitation
Organizations and individuals exploiting oil and gas shall have to abide by the current regulations on oil and gas exploitation, strictly comply with the contents of the general plans as well as the field development plans, which have already been approved; apply advanced technical measures and use advanced equipment for optimum oil and gas recovery without causing harms to the earth’s substrata, the ecological environment and the field safety.
Article 14.- Right to use equipment and means
The Vietnamese Government has the right to use equipment and means in service of petroleum activities, including pipelines and depots being managed and used by oil and gas exploiting organizations or individuals, provided that they shall not obstruct petroleum activities and not increase the costs for contractors.
Article 15.- Obligation to dismantle works
Organizations and individuals conducting oil and gas prospection, exploration and exploitation activities must draw up programs, plans and cost estimates for the dismantlement of fixed works in service of oil and gas prospection, exploration and exploitation activities and submit them to the oil and gas State management body for approval. The dismantling expenses shall be calculated into the costs of oil and gas recovery.
At the request of the oil and gas State management body, organizations and individuals carrying out oil and gas prospection, exploration and exploitation activities may not dismantle or may dismantle only part of the above-said fixed works.
Article 16.- Petroleum insurance
Organizations and individuals carrying out petroleum activities shall have to buy insurance in accordance with the provisions of Vietnamese law and international practices in the oil and gas industry, particularly insurance for projects in service of petroleum activities, environmental pollution insurance, human life insurance, property insurance and the third party’s civil liability insurance.
They are encouraged to buy insurance at Vietnamese insurance companies.
Article 17.- Vietnam Oil and Gas Corporation’s responsibility to report
The Vietnam Oil and Gas Corporation shall have to forward to the oil and gas State management body the following documents:
1. Annual and long-term planning and plans on petroleum activities;
2. Quarterly and annual sum-up reports on the work performance and results of the petroleum activities;
3. The reports on implementation of economic and/or technical projects for petroleum activities;
4. Reports on important events and incidents related to petroleum activities;
5. Other reports at the request of the oil and gas State management body.
The time limit and content for each type of document shall be stipulated by the oil and gas State management body.
Article 18.- Information supply
Contractors shall have to fully supply information, data and reports on petroleum activities according to regulations of the oil and gas State management body.
The competent State management bodies may request contractors to supply information and reports when necessary, in accordance with their respective State management functions.
Article 19.- Keeping confidential information
Reports and information must be kept confidential according to the provisions of Vietnamese law.
Organizations and individuals conducting petroleum activities may use and keep in Vietnam the original documents, specimen and reports; may temporarily export for re-import such documents and specimen according to the regulations of competent State bodies.
Article 20.- Forms of petroleum contract
Petroleum contracts shall be signed in the following forms:
- Production-sharing contracts;
- Joint operation contracts;
- Joint-venture contracts.
Besides the above contractual forms, the Vietnam Oil and Gas Corporation and partners may opt for other contractual forms.
Article 21.- Operators
The nomination or hiring of operators shall be agreed upon in the petroleum contracts or made in a separate document.
The scope of authorized operators’ activities shall be agreed upon by contractual parties in the petroleum contracts or documents on nomination or hiring of the operators.
The operators may represent the contractual parties to conduct oil and gas prospection, exploration and exploitation activities, exercise the rights and perform the obligations within the scope of authorization under the agreement on nomination or hiring of operators, and abide by other relevant provisions of Vietnamese law.
Article 22.- Joint operation companies
A joint operation company is established to represent the contractual parties to conduct oil and gas prospection, exploration and exploitation activities, exercise the rights and perform the obligations within the scope of authorization under the agreement on joint operation, and abide by other relevant provisions of Vietnamese law.
The joint operation companies have their own seals, may open accounts, recruit labor, sign economic contracts and conduct other activities as authorized.
The Ministry of Planning and Investment shall prescribe the organization and operation of the joint operation companies.
Article 23.- Bidding for lots
The oil and gas State management body shall organize lots bidding according to the regulations on bidding for oil and gas prospection, exploration and exploitation lots, issued by the Vietnamese Government.
Where only one partner participates in bidding or for other special cases, the Prime Minister shall decide the appointment of bidders at the proposal of the oil and gas State management body.
Article 24.- Prospection and exploration stage
The prospection and exploration stage defined in Article 17 of the Petroleum Law may be divided into small phases. The time limits of small phases shall be agreed upon by the contractual parties.
Article 25.- Prolongation of the prospection and exploration stage
Where the prospection and exploration stage expires while the contractors have not yet fulfilled their working programs, the time limit of the prospection and exploration stage may be prolonged according to the provisions in Article 17 of the Petroleum Law. The contractors and the Vietnam Oil and Gas Corporation must submit the documents stating clearly the reasons for the prolongation to the Ministry of Planning and Investment for consideration and approval before the end of the prospection and exploration stage.
Article 26.- Retaining areas where gas is discovered
The gas discovery of commercial value as stipulated in Article 17 of the Petroleum Law means the gas discovery where, through the reserve evaluation and preliminary assessment by the contractors, the investment in exploitation shall yield results.
The contractors and the Vietnam Oil and Gas Corporation shall have to compile documents stating clearly the reasons therefor and the duration for temporary retaining of the areas where gas is discovered, and submit them to the Prime Minister for consideration and decision. If the duration for retaining the area where gas is discovered has prolonged for up to five (5) years and the contractor still fails to find the gas outlets, the Prime Minister may permit further prolongation for two (2) more years at the request of the contractor and the Vietnam Oil and Gas Corporation.
Where the contractor deliberately delays or lacks goodwill in reaching the agreement on the gas purchase and sale contract, the permitted retaining of the area where gas is discovered may be suspended or may not be considered for prolongation.
Article 27.- Temporarily ceasing the exercise of a number of rights and obligations in the petroleum contracts
1. Temporary cessation in case of force majeure.
Parties to a petroleum contract may agree upon the mode of temporary cessation of exercising a number of rights and obligations in the petroleum contract in case of force majeure circumstances under the provisions in Article 17 of the Petroleum Law. The force majeure circumstances shall be agreed upon by the contractual parties in the petroleum contract.
Where the force majeure circumstance ends but its consequences have not yet been overcome, the continuation of the temporary cessation of exercising a number of rights and obligations in the petroleum contract shall be considered and decided by the Prime Minister.
2. Temporary cessation in special cases.
Special cases of temporary cessation of exercising a number of rights and obligations in petroleum contracts under the provisions in Article 17 of the Petroleum Law mean cases of temporary cessation for defense, security or other special reasons. The Prime Minister shall consider and decide case by case at the proposal of the contractors and the Vietnam Oil and Gas Corporation.
Article 28.- Return of prospection and exploration areas
The contractors shall have to return the prospection and exploration areas under the following regulations:
1. Not less than 20% of the initial contractual area shall be returned by the end of each small phase of prospection and exploration.
2. The entire remaining contractual area shall be returned after the conclusion of the prospection and exploration stage, excluding areas being under deposit appraisal, field development or oil and gas exploitation areas and areas retained under the provisions of Article 17 of the Petroleum Law.
Contractors may voluntarily return areas at any time during the prospection and exploration stage. The voluntarily returned areas shall be subtracted from the obligation to return areas. The voluntary return of areas shall not reduce the obligations already committed in the petroleum contracts.
The returned areas must create simple geometric forms.
Fixed works must be dismantled from the returned areas under the provisions in Article 15 of this Decree.
Article 29.- Work commitments
Contractors and the Vietnam Oil and Gas Corporation must reach agreement on work programs in the prospection and exploration stage with minimum commitments regarding the geographic survey volume, drilling well volume and other general researches as well as commitments regarding training, recruitment and technology transfer.
The cost estimate for the above-mentioned minimum work commitments shall be considered the minimum financial commitment. A contractor shall be considered as having fulfilled the minimum financial commitment when the minimum work commitments have already been fulfilled.
Where contractors ask for the termination of the petroleum contracts but have not yet fulfilled the minimum work commitments, they shall have to return to the Vietnam Oil and Gas Corporation a sum of money corresponding to the work volume committed to perform but not yet completed, which is calculated according to the minimum financial commitment.
Article 30.- Early exploitation
During the prospection and exploration stage, if contractors conduct early exploitation in the contractual areas, they shall have to submit to the oil and gas State management body the early exploitation plans for approval as stipulated by the Petroleum Law and this Decree.
Article 31.- Work to be done after discovery of oil and gas
After discovering oil and gas, contractors shall have to promptly notify and report on the research results, evaluation and relevant documents to the oil and gas State management body and the Vietnam Oil and Gas Corporation.
Contractors and the Vietnam Oil and Gas Corporation shall have to reach agreement in the petroleum contracts on terms regarding grounds to determine wells of commercial value, time limit for submitting the well reserve appraisal programs, outline plans and field development plans.
Contractors shall have to notify the reserve appraisal results to the Vietnam Oil and Gas Corporation. If the appraisal results show that the wells are of commercial value, the contractors are entitled to declare commercial discovery.
Contractors and the Vietnam Oil and Gas Corporation shall have to submit to the oil and gas State management body the deposit reports and the field development plans for submission to the Prime Minister for approval.
After the field development plans are approved, if the contractors fail to proceed with the field development and oil and gas exploitation according to the time limits prescribed in the written approval, the oil and gas State management body is entitled to recover the fields.
Article 32.- Using petroleum for exploitation activities
In the course of oil and gas exploitation, contractors may use oil and gas exploited from the contractual areas for prospection, exploration and exploitation activities at the levels suitable to the international practices in petroleum industry.
Article 33.- Periodical reports
In the course of oil and gas exploitation, contractors shall have to submit periodical reports on exploitation output, constituents and percentage of oil and gas exploited from each well, each subject conducting exploitation to the Vietnam Oil and Gas Corporation.
The above reports must also include information on oil and gas volume used in service of exploration and exploitation, the volume of oil and gas lost or burned off.
Article 34.- Using accompanied gas
Contractors may use accompanied gas exploited in the contractual areas as fuel in service of petroleum activities at fields or for back injection into wells.
Accompanied gas shall be burnt off only when so permitted by the oil and gas State management body.
The Vietnamese Government shall be entitled to use the accompanied gas free of charge, which the contractors intend to burn off if this does not obstruct the contractors’ activities. In that case, the contractors shall have to create conditions for the above work to go smoothly.
Article 35.- Oil and gas field stretching beyond the contractual areas
Where oil and gas fields stretch beyond the contractual areas to blocks neither opened to bidding nor having bidders appointed, the Vietnam Oil and Gas Corporation and the contractors shall elaborate projects for cooperation in exploiting such entire fields and submit them to the Prime Minister for approval.
Article 36.- Field consolidation
Where oil and gas fields of the contractual areas stretch into the areas of blocks already opened to bidding, having bidders already appointed or with petroleum contracts being already signed, the concerned parties shall agree to draw up projects for joint exploitation of the entire field and submit them to the Prime Minister for approval.
RIGHTS AND OBLIGATIONS OF ORGANIZATIONS AND INDIVIDUALS CONDUCTING PETROLEUM ACTIVITIES
Article 37.- Right to sign contracts in service of petroleum activities
Organizations and individuals conducting oil and gas prospection, exploration and exploitation activities shall have the right to sign goods purchase and sale contracts, petroleum service contracts with subcontractors or with other organizations and individuals in service of petroleum activities
Contractors and subcontractors shall have to priotise the purchase of goods made and supplied by Vietnam; priotise the signing of service contracts with Vietnamese organizations and/or individuals on the principle of ensuring the competitiveness in prices and quality.
Article 38.- Regimes towards laborers
Contractors must work out the labor rules, wage scales, regime of bonus and allowance payment and other regimes for the laborers in conformity with the provisions of Vietnamese legislation on labor, taking into account international practices in the petroleum industry; wo