Pham Van Long of the VESS delivers a speech at the event. (Photo: VNA)They made the comment at an event to announce results of a research on theenergy transition trends and policy implications for Vietnam’s oil and gas industryconducted by the Vietnam Center for Economic and Strategic Studies (VESS) inHanoi on October 19.
Speaking at the event, Pham Van Long of the VESS told participants that lastyear, Vietnam ranked 61 out of 115 countries in terms of readiness for energytransition.
He said energy sectors such as electricity and transport tend to change rapidlyin response to Vietnam's commitment to reducing greenhouse gas emissions. Thedomestic oil and gas industry, which is the key supplier of fuels for all domesticindustries, has also faced opportunities and challenges amid the global energytransition.
Long said: “The local oil and gas industry has been coping with challenges, butthere are also new opportunities, if it knows how to effectively and appropriatelyenforce policies. This move will help Vietnam’s oil and gas industrysuccessfully transform."
Currently, Vietnam's oil and gas industry is facing an extremely difficultsituation in raising oil reserves to compensate for annual production. Inaddition, investment in oil and gas exploration remains poor due to high costsand risks. Meanwhile, policies conducted to minimise the use of fossil fuelswill create more barriers to the development of the oil industry.
Inadequacies
According to Long, the draft revised Law on Petroleum is expected to createopportunities and promote issues on investment, discovery, exploration andexploitation of new oil and gas fields in a rapid and convenient manner, notingthat the draft law now still has some shortcomings.
The revised draft Law on Petroleum stipulates activities for upstream oil andgas only, but does not regulate activities for middle and downstream oil andgas. This will cause conflicts and overlaps in the process of managing the oiland gas value chain.
The draft revised law has also proposed tax incentives for investors who canenjoy a reduction of corporate income tax rate from 25% to 50%. Over the past10 years, ASEAN member countries are in a race to reduce corporate income taxrates. ASEAN’s average tax rate reduced from 25.1% in 2010 to 21.7% in 2020.That is the reason why Vietnam's reduction of tax rate is said to beineffective.
Moreover, the draft law does not contain legal provisions on settlement ofdisputes between Vietnam and foreign investors. This will cause losses to theState budget. There are also no specific guidelines for the investigation,exploration and production of unconventional oil and gas.
Reposition
According to experts, gas is still considered an important factor to helpgradually replace coal-fired power sources and support the transition fromfossil fuels to renewable energy. They said a heavy reliance on importedliquefied natural gas (LNG) was not a sustainable solution for the country'senergy transition.
The National Power Development Plan VIII for the 2021-30 period with a visionto 2045 proposes that Vietnam needs to join the LNG market with long-termcontracts to avoid price fluctuations. Moreover, investment in specialisedfacilities for imported LNG requires large investment capital, while there arealways high risks in operations.
Therefore, Vietnam's oil and gas industry needs to boost exploitation of itspotential oil and gas fields instead of maintaining the current output asproposed by the National Power Plan VIII.
Vietnam is now in the process of energy transition with great potential insolar and wind power. The electricity generation from renewable sources createssignificant changes in the demand for fossil fuels for the electricityindustry. However, this transition has also posed challenges in power systemoperation. In addition, electrification has contributed to diversifyingrenewable energy.
Experts recommended that the oil and gas industry reposition itself in theentire energy production and supply chain with a long-term vision towards 2050./.
VNA
