Decision No. 459/QD-TTg of March 30, 2011, approving master plan of development of Vietnam gas industry in the 2015 period, an orientation toward 2025

DECISION

APPROVING MASTER PLAN OF DEVELOPMENT OF VIETNAM GAS INDUSTRY IN THE 2015 PERIOD, AN ORIENTATION TOWARD 2025

THE PRIME MINISTER

Pursuant to the Law on Organization of Government dated December 25, 2001;

Pursuant to the Decision No.386/QD-TTg dated March 09, 2006 of the Prime Minister approving “the development strategy of Vietnam oil and gas industry in the 2006 – 2015 period, an orientation toward 2025”;

Pursuant to the Decision No.223/QD-TTg dated February 18, 2009 of the Prime Minister approving “Development plan of Vietnam oil and gas industry in the up to 2015 period, an orientation toward 2025”;

At the proposal of the Minister of Industry and Trade,

DECIDES:

Article 1.To approve the master plan for developing Vietnam gas industry in the up to 2015 period, an orientation toward 2025 with the following main contents:

1. Development viewpoint

To develop synchronously, efficiently the gas industry through the promotion of domestic resources and to strengthening international cooperation, promote the decisive role of the state in investment in infrastructure of gas industry.

To develop gas industry on the principle of using economically, efficiently and rationally the domestic natural resources; to strengthen import to ensure energy resource for sustainable national development.

To promote investment in deep processing of natural gas and diversify products to enhance the use value of gas and the efficiency of gas products in the economy, reduce the proportion of imported LPG.

To develop infrastructure system on the principle of using the maximum capacity of existing infrastructure system (pipelines, collection stations, processing,...).

To develop gas consumption markets under the market mechanisms regulated by the State and gradually integrate into the international and regional gas market.

To contribute the long-term energy security assurance for the country and implement the policy of sustainable development.

2. Development targets

On exploration, mining of gas in the country: to promote exploration, appraisal in order to correct potentiality, natural gas reserves for put early detection of commercial gas into exploitation; to strive to reach exploitation production of domestic natural gas over 14 billion m3 per year in 2015 and reach 15 to 19 billion m3 per year in the 2016 - 2025 period.

On the import of gas: urgently promote activities of negotiation and preparation of the investment in infrastructure for importing LNG in order to ensure balance of supply and demand of domestic gas; and to give priority to implement the project of first LNG import in the South to ensure adequate supply, maintenance and development of gas markets in the South; to research and implement LNG import projects in the Northern and Central regions.

On development of infrastructure of domestic gases industry: to complete gas industrial infrastructure of southern area; to form and develop gas industrial infrastructure in the northern and Central regions, gradually build up network system connecting inter-regional gas pipelines, joint sectors; to boost investment in the projects to build plants of processing and processors (GPP) to deeply process natural gas exploited in the country (separating ethane, LPG, condensate, ...) to improve the efficiency of gas use and make savings in resource use.

On LPG industrial development: to invest in development of projects to produce domestic LPG (gas processing plants and refineries), to reduce proportion and gradually replace imported LPG; to expand the existing storage capacity associated with the deployment of construction of new projects to meet domestic demand with a size of about 1.6 to 2.2 million tons/year in 2015 and reached a size of about 2.5 - 4.6 million tons/year in 2025; to ensure to meet minimum reserve requirements over 15 supply days in the up to 2015 period.

On development of gas consumption markets: to continue the development of the electricity market as the core markets of gas consumption (including LNG) with the proportion of about 70% - 85% of the total gas production, meeting the input gas fuel resource to produce electricity; to promote use of gas and gas products in petrochemical production, urban activities and transport to help the assurance of the environment and improve the added value of the gas; to strive to develop gas market with a size of from 17 to 21 billion m3/year in 2015 and from 22 to 29 billion m3/year in the 2016 to 2025 period.

To combine harmoniously the resources of the State, the economic sectors for developing synchronously, efficiently and sustainably the stages in the gas industry.

3. Development orientations

a) Exploration and exploitation of domestic gas

The activities of exploration and exploitation of domestic gas comply with the Decision No.223/QD-TTg dated February 18, 2009 by the Prime Minister approving development plan of Vietnam s petroleum industry in the up to 2015 period, an orientation toward 2025.

b) Gas collection pipeline system

- The up to 2015 period

Cuu Long basin area: to develop collection pipeline systems of natural gas/petroleum gas from the mines Rong, Doi moi, Te Giac Trang and Hai Su Den, Hai Su Trang, connecting to the central compressed air rigs of the mine Bach Ho; pipeline connecting the Su Tu Trang mine with producing gas rig of the Su Tu Vang mine, expected capacity of around 1.5 billion m3/year. Natural gas/petroleum gas of Block 01 & 02 areas and the neighboring Blocks will be collected to supplement the gas supply for the pipeline system of Rang Dong – Bach Ho – Dinh Co. Nam Con Son basin area: to deploy the construction of the pipeline systems to collect gas from the mines Hai Thach – Moc Tinh, Lan Tay, Thien Ung, Chim Sao and other mines for additional provision of about 3 billion m3/year for the market of southern region.

Malay - Tho Chu basin area: to build pipelines connecting the mine Hoa Mai and Block 46 with the pipeline system PM3 - Ca Mau from 2013. Gas of the mines discovered of Block B & 48/95, 52/97 and the adjacent Blocks 46, 50, 51 shall be sent to the pipeline Block B - O Mon and PM3 - Ca Mau.

Northern area: to connect gas resources of the northern area of the Red River basin (Block 102-106, 103-107,...) into clusters and research to place central technology rig at the Thai Binh mine (Block 102 to 106 ). To build the pipeline to collect gas from the mines of the Block 111, 112, 113 to the central gas processing rig of Block 113.

- The 2016 – 2025 period

Southern area: to connect the mines Rong Vi Dai , Hai Au, Thien Nga and nearby mines to supplement gas supply source for the pipeline system Nam Con Son -1 and Nam Con Son -2 in the 2017 to 2019 period; to build the pipeline system connecting the mines of Block 46-2 such as Rach Tau, Khanh My, Phu Tan with the pipeline system PM3 - CAA the basin Malay - Tho Chu from 2019; to build the pipelines from the Phu Khanh basin to the Mekong basin, from basin Tu Chinh - Vung May to the Nam Con Son basin on the basis of the results of exploration in this area. Southern area of Red River basin: in case of having appropriate technologies for development and exploitation of mines with high content of CO2, to send gas back to central gas processing rig on the Su Tu Bien mine (Block 118) to collect gas from the nearby mines as Ca Heo (Block 119), 115-A (Block 115).

c) The system of offshore gas transportation main pipelines

- The up to 2015 period

To implement the construction investment by the stages of the pipeline system of Nam Con Son-2 (Hai Thach and Moc Tinh, Thien Ung to Vung Tau) put into operation from 2013 to 2014 with a design capacity of 7 billion m3/year to transport timely gas and commercial condensate from the mines Hai Thach, Moc Tinh, Thien Ung, as well as net mines discovered in the Nam Con Son basin, Tu Chinh - Vung May to the shore for progressive gas consumption demand of the Southeast region.

To complete the construction of pipelines system Block B - O Mon put into operation from 2014, in accordance with the progress of the development of gas resources in Block B area; and arrange the offshore, onshore holding points in southwest region where the pipeline system passes through to develop industrial gas consumers.

Actively research and implement the construction of gas pipeline systems in the northern rea of the Red River basin (from the mines Thai Binh, Ham Rong of Block 102 to 106, Bach Long, Hong Long, Hoang Long of Block 103 - 107/04) to the area of Thai Binh province first aiming to supply gas to the existing consumption market in Thai Binh province and gradually expand to the other provinces/cities of the Red River Delta (Ha Noi, Hai Phong, Nam Dinh, ...).

To develop pipeline system to transport natural gas to the southern area of Red River basin. Depending on the appraisal results, plan to build a gas pipeline system from the mine Bao Vang (Block 113) to Quang Tri province, with a length of about 120 km, the design capacity of about 1-3 billion m3/year.

- The 2016 – 2025 period

Based on the results of the exploration of gas resources of the Phu Khanh basin area with the ability to exploit expected about 1.5 billion m3/year from after 2019, research to build a new pipeline system in the after 2019 period to lead gas from the Phu Khanh basin to the Son My area (Binh Thuan) and connecting with pipeline system collecting Bach Ho mine.

To study the possibility of transporting gas from the added deposit part (if any) in Block B & 48/95, 52/97 and the adjacent mines.

To develop the pipeline system to transport natural gas to the southern area of Red River basin. During this period, plan to build a gas pipeline system from the mines of the Blocks 117 - 118 - 119 to Quang Ngai/Quang Nam province with a design capacity of about 2-4 billion m3/ year.

To further study the plan of gas import via the TRANS ASEAN system and through the pipeline system PM3-CAA, Block B, Nam Con Son 1 or Nam Con Son 2.

d) The onshore gas pipeline system

 - The up to 2015 period

To continue the research and deployment of the pipeline project Phu My - Ho Chi Minh City after completion of construction investment phase 1. To research and develop the pipeline system from the Nhon Trach power plant to Nhon Trach Industrial Zone, from the Hiep Phuoc Power Plant to the Hiep Phuoc Industrial Zone, Thu Thiem Industrial Zone.

Based on balance of gas supply and demand between two areas, to research the construction of the pipeline project to connect East - South West from the Hiep Phuoc to O Mon to have the infrastructure to make gas sources generation between the two areas of the Southeast and Southwest, to provide gas for the industrial household along the pipeline; the designed capacity of about 2-5 billion m3/year, the total length of about 180 km.

To invest in pipeline system linking from Southern LNG storage to the existing GDC to transport imported LNG gas and mix it into the southern air supply systems.

In the North, build an onshore pipeline system with a capacity of about 1-3 billion m3/year, leading gas to the gas consumers of Thai Binh Province.

To develop low pressure gas distribution network all over the country to develop the use of gas in the fields of industry, civil use, ... to ensure a stable and safe regulatory of gas system, added value for gas projects, while contributing to the modernization of the economic, social branches, environmental pollution reduction.

The 2016 - 2025 period

To continue the research and deployment of stage 2 of the pipeline project Phu My - Ho Chi Minh City in the direction of leading gas to the industrial zones of Dong Nai, Bien Hoa, Binh Duong and the Thu Duc Power Plant.

To research and build a gas pipeline from Hiep Phuoc - Binh Chanh - Duc Hoa to expand gas supply ability to the gas consumers in Long An, south and southwest of Ho Chi Minh City, is expected for operation in 2017.

On the basis of ability to increase gas supply source in the North Central (from domestic or imported source) and development planning of future gas market, consider to build a closed pipeline system onshore of the Red River delta region connected between Thai Binh - Hai Phong - Hanoi with a capacity of transportation of about 1-2 billion m3/year. Pipeline system with ability to connect additionally with pipelines transporting imported gas from LNG storage of Nghi Son - Thanh Hoa in the case of project to import gas to this area is implemented.

Besides, in case of additional gas discovery in the Blocks 111 to Block 120, gas supply source will be added to the Central Central, gradually research expanding development of consumption market, plan the system of the onshore transportation pipeline, connecting between the two areas of markets expected to develop first in central region as Quang Tri and Quang Ngai/Quang Nam province to supply gas to Da Nang city and Thua Thien Hue province.

e) Gas processing plant (GPP)

- The up to 2015 period

The southeast: to invest in upgrading and expanding 02 existing gas treatment plants at Dinh Co, and actively implement the new investment project in 01 gas processing plant in sync with the 2^ndpipeline project Nam Con Son from 2013 to 2014 to increase the use value of gas on a basis of consistent with the situation of increasing exploited gas production of the Cuu Long and Nam Con Son basins according to the plans to predict gas exploitation production.

The southwest: to implement the GPP investment project near the center of gas distribution Ca Mau to handle common gas source from the pipeline system PM3 and Block B to Ca Mau, to extract ethane, LPG and condensate, increase the natural resource values. Northern Area: to research and deploy to build GPP in Thai Binh and Quang Tri provinces at the same time with the construction of pipeline from the Blocks 102 to 106 and 111 to 113

The 2016 - 2025 period

The area of Quang Ngai/Quang Nam province: to research, build newly GPP with traffic estimated of about 1-4 billion m3/year, operated from 2018 to process gas from the Blocks 115, 117, 118, 119 and the other Blocks of the southern area of Red River deposit basins.

e) Storage of imported LNG and gas re-gasifying

- The up to 2015 period

Expeditiously study and deploy the first storage project of LNG import of Vietnam in the Southern region with a stage 1 size of about 3-5 billion m3/year. Actively carry out to research the construction of onshore LNG storages at the locations with suitable conditions of ports for capability to receive the LNG ships.

In the North, to research investment in building one to two LNG storage ports and to re-gasify at the locations with convenient infrastructure such as Hai Phong and Thanh Hoa.

The 2016 - 2025 period

To continue to implement the phase 2 of existing LNG storage in the South with a size of about 7 to 10 billion m3/year, while considering the possibility of new building of one to two LNG storages at other locations across the country.

g) Hubs LPG storage

The total capacity of LPG storages need to be supplemented at least on a national scale in the 2011 - 2015 period of about 14,000 to 27,500 tons, the 2016 to 2025 period of about 54,000 to 85,000 tons.

To expand the capacity of the existing storages, and implement new projects of construction for the capacity to reach at least 75,600 to 85,600 tons in 2015 and about 127,600 to 176,600 tons in 2025. The hub LPG storages concentrated major in some provinces/cities of each region such as Hai Phong (North), Thanh Hoa, Ha Tinh (North Central), Da Nang, Quang Ngai (Central) and Ba Ria - Vung Tau, Dong Nai, Ho Chi Minh city (South) , …

Total investment capital needs

Preliminary estimates, total investment capital needs for developing infrastructure of Vietnam gas industry in the up to 2015 period, an orientation toward 2025 is about 9 to 12.5 billion USD under the basic and high plans. In which, the 2010 - 2015 period, it is needed about 5.3 to 5.4 billion USD, the 2016 to 2025 period of about 3.6 to 7 billion USD.

The list of investment gas projects in the up to 2015 period and an orientation toward 2025 are described in the Annex.

4. The solution, the policies of implementation of the Plan

 a) Policy of gas prices

- To develop evaluation methods to sell gas to the consumers reflecting the sufficient costs of actual provision, but it must reflect the proper competitive value of gas with the gas fuels on the market.

- The study the application of the system of "general overall price evaluation" mixing gas from natural gas sources and from domestic and imported LNG to work out a price rate/cost of general wholesale gas on the market. Since then, set up the sale price for final consumers, depending on consumers in the economy, the proportion of consumers on the gas market and the acceptability of each consumer.

- To develop and promulgate the route and tariff framework for market price access applied to strategy consumer groups (such as electricity, chemicals, transport) and the cost of gas pipelines (in particular according to its output level and geographic area).

- The price determination for each stage in the gas industry is made on​​the point of costs recovery and having a reasonable profit.

- To apply a policy of gas-buying price determination from the gas producers/importers on the basis of cost recovery and reasonable profit rate in the up to 2018 period, then gradually promote the application of competitive gas prices mechanism to determine the sale and purchase price of gas.

- The competitive gas prices calculated for the electricity consumers, transport are calculated with a long-term vision and by the method with considering environmental protection cost.

b) Solution, policies on gas market models

- To continue to maintain the implementation of market model of a unique wholesaler in the up to 2020 period, gradually develop the gas industry by the competitive wholesale market model.

- To specify and publicize the management mechanisms and regulation of the sale and purchase activity of the Vietnam national oil and gas Group to "the unique gas wholesaler" create added value on the gas lines.

- To study and promulgate regulations on regulating air transportation activities to ensure the management and operation safely and efficiently.

c) Measures and policies to encourage investment

- To combine harmoniously the state investment capital and mobilize maximum participation of the domestic and foreign private sector to promote the exploration of natural gas in the country, to develop synchronously, efficiently and sustainably the processes of the gas line.

- To study and propose the application of the incentive policies for oil and gas contracts in the basins of Red River, Phu Khanh, Malay - Tho Chu, Tu Chinh - Vung May, Truong Sa - Hoang Sa to promote development of mining small-scale, deep-water mines, mines with high content of CO2 to recover the natural gas resources.

- To encourage the mine owners, importers of gas, the major gas consumers in joint investment of gas projects integrated between upstream stage with the stages of middle stream and downstream to the secondary stage.

- To research and put the investment projects related to collection, transportation, processing, storage, trade, import of gas, development of using gas and the ability product for transport, urban city gas ...into the list of sector specially encouraged investment in and specify the incentive policies for these projects.

- To research and develop policies and mechanisms to ensure safety, simplify procedures and support arrangement of capital for the gas projects.

d) Solution, self-development policies

- The government continues to invest at the rate of dominant capital in the petroleum enterprises of Vietnam operating in the field of gas infrastructure.

- To have the policies to develop the units of consultancy, design and construction of gas reserves and gas pipeline networks.

đ) Measures and policies on science and technology

- To promote economic - technical study and receipt of transferring technology handling and processing gas of high CO2 content and raw materials, fuel made from natural gas.

- To study the matter of gas reserve, plans linking to the gas pipeline network of the nation and ASEAN countries.

- To invest, research, transfer technology using CNG, LPG widely in the field of transportation.

- To study and promulgate national regulations on air quality transported through the pipeline system, terminal; distributed and consumed in Vietnam and design regulations of the natural gas infrastructure program.

- To develop and promulgate provisions, standards, regulations, rules and norms ... in the collection, import, export - transportation - handling - storage - distribution of gas and gas products to ensure the gas industry to operate safely, conveniently and efficiently.

- To prioritize funding in the Ministerial-level, State- level scientific research programs of gas industry sector.

- To research, disseminate and implement strategies, policies of management of the countries to draw lessons for Vietnam’s reference to promote and improve the efficiency of gas industry.

e) Human resource development solutions

- To train to improve the qualifications of staffs, engineers and workers working at the units of existing gas trading, production; additionally train for the weak, deficit stages; to associate with the forms of training such as new training, in-place practice training, seminar training, training by projects, by researching theme in a systematic manner from basic level to high level.

- To develop the training plan and plan to use leading, key staffs through collaboration with the specialized training institutions of international prestige.

- To apply the appropriate policies to attract overseas-based Vietnamese and foreigners who have experience in the oil and gas activities to work in Vietnam.

g) Measures for safety and environmental protection

- Strictly abide by the provisions of the legislation on safety, prevention of fire, explosion, working conditions, industrial hygiene, and supply of labor equipment, high-tech use, and safe equipment; periodically check the system of control, automatic alarm.

- To develop, update, improve, and maintain regularly the response plans in case of emergencies: the plans of prevention of fire, explosion, control, emergency response, the case of accidents, natural disasters...

- To enhance the communication, education, knowledge dissemination, training on safety and environmental protection in the oil and gas activities for officials and employees of oil and gas industry and the community.

- To coordinate the environmental protection measures in the gas industry with environmental protection measures in the other activities in the same area of operation. To synthesize, analyze, evaluate, and implement the necessary measures to ensure workers’ health, actively prevent and treat, handle timely the cases of occupational diseases.

- To invest much in the stage of basic investigation in the areas of operations or projects for assessment and environmental protection measures

h) Solution of security and national defense

- To strengthen coordination among investors of gases industrial projects with the Ministry of Defense, the Ministry of Public Security, Ministry of Foreign Affairs to actively prepare and implement the fine tasks of protecting the sea area and national sovereignty, ensuring security for the deployment of activities of upstream, middle stream, downstream of gas industry.

- To coordinate between the Vietnam national gas and oil Group, the Ministry of Defense, Ministry of Public Security, Ministry of Foreign Affairs to carry out petroleum activities in general within the framework of the "oil and gas diplomacy", to take advantage of the relationships between governments to attract investment, create security shield by the works involving foreign investment

Article 2. Organization of implementation

1. Ministry of Industry and Trade

- To direct and supervise the deployment, implementation of the overall development plan of the Vietnam gas industry in the period toward 2015, an orientation toward 2025, first, to focus on implementing effectively investment projects in the period toward 2015.

- To preside over and coordinate with the concerned ministries, branches to direct the Vietnam National oil and gas Group to strengthen and promote the exploration and exploitation in the regions with great potential oil and gas to increase reserves of verification, to ensure to reach the target of gas exploitation production in the planning period.

- To preside over and coordinate with ministries and branches in directing the Vietnam National oil and gas Group to deploy the LNG import project, construction of ports, LNG storage and re-gasifying to raise the ability of gas supply to domestic market’s demand in the period toward 2015 and orientation toward 2025.

- To preside over and coordinate with concerned ministries and branches in formulating and promulgating policies of reasonable gas prices to present a flexible gas price definition system, plan of mixing gas price to ensure financial incentives for investment in exploiting the gas mines especially the small, deep water, offshore mines, mines with high levels of CO2, ..., while ensuring the competitiveness of the gas raw material, fuel with other alternative fuels, building a roadmap for market reform in the period before the year 2020.

- To continue the review for supplementation and adjustment of the planning content in accordance with the development of Vietnam s petroleum industry and the volatility of world gas industry; to perfect mechanisms and policies to facilitate the Vietnam enterprises operating in the gas industry to have conditions to develop, improve and perfect the competitiveness in the trend of regional and international integration.

- To preside over the appraisal and approval of additional Plan for commercial LPG storage projects with storage capacity below 5,000 tons.

- To compile the report of strategic environmental impact assessment, submit for approval in accordance with the current provisions in 2011.

2. Ministry of Finance, Ministry of Planning and Investment, State Bank of Vietnam

Ministry of Finance, Ministry of Ministry of Planning and Investment and State Bank of Vietnam within their assigned tasks, deploy the specific solutions, the above policies and support investors in arranging capital for the key projects on gases industry in the Plan.

3. People s Committees of provinces and cities under central government

People s Committees of provinces and cities coordinate with the Ministries of: Industry and Trade, Transport and the State management agencies and the enterprises building economic- social development plans of local associated with the development of infrastructure of the gas industry to have impact of inter-sector support.

Article 3.This Decision takes effect from the date of signing.

Article 4.The ministers, heads of ministerial-level agencies, chairmen of the members’ Council, General Director of Vietnam national oil and gas Group, Chairman of the Management Board, General Director of Vietnam National Petroleum Company and the relevant agencies are responsible for the implementation of this Decision.

ANNEX

LIST OF GAS AND OIL PROJECTS INVESTED IN THE UP TO 2015 PERIOD, AN ORIENTATION TOWARD 2025
(Issuing together with the Decision No.459/QD-TTg dated March 30, 2011 of the Prime Minister)

I. NATURAL GAS

II. LIQUEFIED PETROLEUM GAS (LPG)

III. COLLECTION OF REQUIREMENTS FOR INVESTMENT CAPITAL FOR GAS INDUSTRY IN THE 2010-2025 PERIOD

Calculated Unit: million USD