Vietnam’s oil and gas sector will become the focus of the petroleum industry with many projects to be developed by oil conglomerates coming from the U.S., Russia, and Japan in the coming time.

Those developments, ranging from the upgrade of the Southeast Asian country’s sole oil refinery to the operation of a big gas field, are about to change the face of the local petroleum sector.

On Friday, Nguyen Hoai Giang, general director of Binh Son Refining and Petrochemical Company (BSR) which manages Dung Quat Oil Refinery in the central province of Quang Ngai, told Tuoi Tre (Youth) newspaper that his firm is negotiating with Russia’s Gazprom Neft about the possible expansion of that only refining facility.

The Russian side has formulated many plans corresponding to the funding Gazprom Neft can provide, which ranges between US$1.5-3 billion, Giang said.

The budget will enable the Russian oil and gas conglomerate to acquire a 49 percent stake in Dung Quat Oil Refinery besides helping upgrade the capacity of the plant by 54 percent to about 10 million tons of crude oil per year.

But Gazprom Neft has yet to decide on the exact amount of money to be spent on the acquisition and upgrade of the refinery, Giang said, adding that the Vietnamese side prefers a $2 billion investment plan proposed by the Russian giant for the expansion.

In June this year, Gazprom Neft suggested expanding and increasing the capacity of Dung Quat Oil Refinery to 10 million tons per year with an investment of up to $3 billion.

The proposal came during a working session on an investment cooperation plan for the upgrade of Dung Quat Oil Refinery, which was attended by a Gazprom Neft delegation led by general director A. B. Dyukov and the state-owned Vietnam Oil and Gas Group (PetroVietnam).

On Friday, Do Van Hau, PetroVietnam CEO, told Bloomberg that the Vietnamese group may reach an agreement next year with U.S.-based Exxon Mobil on a $10 billion natural gas and power project, the country’s biggest of its kind.

Hau said the Southeast Asian country received a boost from Exxon Mobil’s gas discovery off Vietnam’s coast in 2012, which will support its plans to develop its natural gas fields, estimated to be the fourth-largest in East Asia.

The first phase of the mammoth project would pipe gas from the field to a processing station from which it will be used to fuel a 2,500 megawatt power plant, Hau told Bloomberg, adding that the power plant is one of the country’s biggest so far and will help curb electricity shortages.

On Tuesday last week, Reuters reported that Japan-based JX Nippon Oil & Energy Corp is seriously considering setting up new refineries and petrol stations in Indonesia and Vietnam as fuel consumption slumps in its home country.

This would be the corporation’s first major downstream oil investment in Asia outside Japan.

“Japan's biggest oil refiner sees the two markets as the most promising locations for investment due to their robust economic growth outlook and openness to foreign investment,” the company's president Tsutomu Sugimori told Reuters in an interview.

Japan's oil demand has dropped by one-fifth over the past decade and it is projected to fall by another eight percent in the next five years, a government energy committee forecast in March.

With oil demand growing 1-2 percent a year, Vietnam is seeking foreign partners to help upgrade its refining capacities in order to reduce dependence on imports. However, Sugimori gave no timeline or spending target for any potential investments.

Vietnam, with a population of over 90 million, is trying to lure more foreign direct investment into its oil sector.

In Vietnam, JX Nippon Oil & Energy Corp previously planned to partner with PetroVietnam to expand Dung Quat Oil Refinery, but gave up on the project in 2013 as the two parties could not conclude financial terms.

Another Japanese refiner is already engaged in the construction of Vietnam's second oil refinery.

Idemitsu Kosan Co, Japan's No. 2 refiner by revenue, is participating in a $9 billion project to build Vietnam's second refinery – the Nghi Son refinery and chemical complex with a capacity of 200,000 barrels per day (bpd), making it the first oil refinery to be built by a Japanese refiner in an Asian country outside Japan.

Work began on Nghi Son, located in the central province of Thanh Hoa, in October last year. The construction is slated to be complete in 2017.

PetroVietnam is also looking for partners for the $7-8 billion investment needed for the 200,000-bpd Long Son refinery in the southern province of Ba Ria-Vung Tau, scheduled for operation in 2020-2030.

Japan's Idemitsu Kosan Co. on Thursday said it had found gas and condensate at the fourth well in Blocks 05-1b and 05-1c off southern Vietnam, Reuters reported.

The finds were confirmed in the wake of drilling tests conducted in May and August, in addition to the discovery of gas and condensate at other wells drilled in the blocks, the company said.

Overseas expansion

On Thursday, Thomson Reuters said that PetroVietnam is in talks with banks for a seven-year loan of up to $1.8 billion to back its bid to buy a stake in Murphy Oil Corp's Malaysian oil and gas assets.

Reuters previously reported Arkansas-based Murphy Oil, which has interests in oil and gas fields in Malaysia, Vietnam, Indonesia, Brunei and Australia, is seeking buyers for a 30 percent stake in its Malaysian assets.

PetroVietnam's offer is more than the $1.5 billion bid placed by the Indian consortium of Oil & Natural Gas Corp and Oil India Ltd. Mitsubishi Corp is also among bidders for the assets.

A limited number of banks are involved in the talks with PetroVietnam for the financing, Thomson Reuters said, without giving the details.

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