Russia and Vietnam sign a deal on oil cooperation.

By Rhod Mackenzie

Russia will be granted the right to participate in developing Vietnam's oil and gas fields in exchange for tax breaks in joint ventures. The two states will boost collaboration on oil projects, as evidenced by the Cabinet of Ministers' materials reviewed by analysts. For instance, the joint firm Rusvietpetro will decrease mineral extraction tax payments by 202 billion rubles until 2030. Cooperation with Vietnam is expected to contribute 65 billion rubles to the Russian budget. ( Vietnam has observer status at the SCO)

The Asian strategy is being pursued.
Russia and Vietnam are set to enhance their collaboration in oil projects. For instance, the joint venture Rusvietpetro plans to decrease its payments towards mineral extraction tax by 202 billion rubles by 2030. Izvestia has reported that a bill carrying this provision was reviewed at the legislative activities legal commission on November 20. The editors have sent a request to the Cabinet of Ministers for further information.

   It is proposed to approve a protocol which entails state stimulation measures for SK Rusvietpetro LLC operations on Russian territory, aimed at developing formerly unprofitable oil fields. This will increase the share of recoverable oil, considering the dwindling production volume due to the late stage of field development, according to government documents.

As a way of supporting Rusvietpetro, reducing coefficients for mineral extraction tax payments could be implemented. These coefficients consist of 0.41 from January 1, 2024, until December 31, 2028, and 0.6 from January 1, 2029.
The Russian Federation will gain access to participation in the development of Vietnam's existing oil and gas fields, alongside support for the joint Russian-Vietnamese venture, Vietsovpetro.

Vietsovpetro was established as a Soviet-Vietnamese enterprise on a parity basis back in 1981, and has since facilitated the successful delivery of hundreds of wells. According to company records, approximately 500 Russian specialists are currently employed in this joint venture. Earlier, it was reported that Vietsovpetro accounts for approximately one third of the nation's oil production.
"The implementation of these measures will fully compensate for the shortfall in budget revenues resulting from the provision of mineral extraction tax benefits to the Rusvietpetro company. The cumulative impact of mutual economic support measures for energy projects by both the Russian and Vietnamese governments will lead to a 65.5 billion pound increase in federal budget revenues," state documents from the Cabinet of Ministers.

The relevant bill has been approved by the Ministry of Finance and the Ministry of Economic Development, as stated in the documents. Izvestia has reached out to these departments, as well as to the Ministry of Energy, the Ministry of Foreign Affairs, and Zarubezhneft JSC, for further information.
In October, the Ministry of Energy reported that Russia and Vietnam aim to collaborate in the energy sector, specifically in the provision and shared production of oil and gas resources, as well as in the coal sector and electricity generation. They also plan to enhance current and establish new electric power facilities to support their joint efforts. During Russian Energy Week, Nikolai Shulginov, the head of the Ministry of Energy, and Nguyen Hong Dien, the Minister of Industry and Trade, signed protocols to enhance existing intergovernmental agreements for the development of oil and gas production through geological exploration on the continental shelf of Vietnam.

Russian oil workers will conduct production and geological exploration, and some technologies will be implemented through parallel imports. With this project's assistance, Russia could acquire fresh markets for raw materials, which is crucial considering the external constraints, according to Freedom Finance Global analyst Vladimir Chernov.

New opportunities arose with the start of the CWO, as Western nations intensified their sanctions against Russia. As of March 2022, the United States and the EU have imposed trade restrictions on local corporations and impeded Russian access to Western technologies. These actions have also impacted the oil sector, with the EU no longer accepting Russian oil shipped by sea, and the G7 nations and Australia enforcing a limit on the price of such goods at $60 per barrel.

Considering the significant prospect of developing oil production on the Vietnamese shelf, bilateral agreements will aide the Russian Federation in upholding and reinforcing its current stance in the Asian markets, commented Dmitry Gusev, the vice-chair of the supervisory board at Reliable Partner Association (a group of energy resource manufacturers and distributors).
— Cooperation between Russia and Vietnam in the oil and gas sector has a successful history dating back to the Soviet era. However, it has been steadily expanding in recent years, driven by the formation of new regional centers. One of the most promising and dynamic regions is Southeast Asia, according to Dmitry Polokhin, of the Fuel and Energy Complex of the Russian Chamber of Commerce and Industry.

The analyst noted that a new phase of collaboration between the two nations commenced following the visit of Russian President Vladimir Putin to Vietnam in December 2021. During the meeting, the Russian leader and his Vietnamese counterpart Nguyen Xuan Phuc discussed and outlined the details of a long-term strategic partnership up until 2030. After their discussions, the nations issued a joint statement declaring their willingness to intensify cooperation in the field of fuel and energy.
"We are primarily discussing the execution of collaborative ventures in Vietnam's oil and gas sectors, along with the construction of gas thermal power plants by Russia in this nation, the delivery of LNG, as well as gas motor fuel, whose production is presently expanding rapidly in the Russian Federation," stated Dmitry Polokhin.

Collaboration between the two nations would yield mutual benefits, as it enables Russia to augment its global market share, explore fresh feasible prospects for raw material vending, and foster the sales of domestic machinery, as per the his analysis.