VIETNAM S SEARCH FOR OFFSHORE OIL

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00554R000200070003-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 21, 2016
• Document Release Date: March 3, 2008
• Sequence Number: 3
• Publication Date: December 1, 1982
• Content Type: REPORT

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Directorate of Secret
Intelligence
Vietnam's Search for
Offshore Oil
Secret
EA 82-10141
December 1982
Copy 2F) 2
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Directorate of Secret
Intelligence
Vietnam's Search for
Offshore Oil
This assessment was prepared b
Office of East Asian Analysis. It was coordinated with
the National Intelligence Council. Comments and
queries are welcome and may be directed to the Chief,
Southeast Asia Division, OEA,
Secret
EA 82-10141
December 1982
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Secret
Vietnam's Search for
Offshore Oil
Key Judgments Hanoi, which is almost totally dependent on increasingly costly oil from the
Information available USSR, is moving to develop offshore oil resources. Vietnamese officials
as of 3 December 1982 claim that the country will begin producing oil next year, with the stated
was used in this report.
goal of producing 20,000 to 40,000 b/d by 1985. Vietnam currently needs
32,000 b/d of oil, much of it for the military. Moscow has set up a joint
stock partnership with Hanoi and will provide most of the expertise and
equipment to develop the offshore fields.
In our view, Hanoi's plans for self-sufficiency are unrealistic. The Soviets
are only beginning to drill, and Soviet
equipment and expertise are inadequate for the job.
Furthermore, Vietnam is pinning its hopes
on three discoveries made by Western firms during 1974-81. While these
finds were promising, much more exploration needs to be done before the
fields are demonstrated to be viable by Western commercial standards.
The Soviets, moreover, are ex eriencin difficulties working with the
Vietnamese bureaucrac
iii Secret
EA 82-10141
December 1982
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 Approved For Release 2008/03/03: CIA-RDP84SO0554R000200070003-7
Vietnam's Search for
Offshore Oil
The Need for Oil
Oil shortages constrain the growth of the Vietnamese
economy. According to IMF reports, the country
imports about 32,000 b/d in petroleum products,
nearly all from the Soviet Union. Although no sec-
toral breakdown is available, it is clear from the size
of the military establishment that the military is the
primary user, preempting other sectors. The domestic
economy, particularly transportation and agriculture,
suffers from chronic shortages. The official media
provide numerous reports and commentary concern-
ing train delays caused by diesel fuel shortages,
transport units that resort to illegal means to acquire
fuel to operate, and large-scale theft of government
gasoline and diesel fuel for sale on the free market. In
the agricultural sector, oil supply problems are com-
pounded by shortages of coal and competing demands
for electric power. For example, many irrigation
systems are run by internal combustion pumps or
electricity from diesel-fired generators.
Cost is also a problem. In 1981 Moscow tripled the
price of oil to $18 per barrel without increasing total
economic aid, in effect squeezing other items out of
the aid package. Furthermore, because Moscow's
price is still only slightly more than half that of world
levels, we believe Hanoi can expect further increases
in the future.
Promising Preliminary Results ...
Faced with continuing oil shortages and the growing
financial squeeze, Hanoi is striving to develop its
offshore reserves. Its publicly stated goal is to produce
20,000 to 40,000 b/d by 1985. Work done by Western
oil companies in the 1970s showed promising results
in offshore areas. Seismic surveys done in the early to
mid-1970s indicated three promising areas:
? The Saigon-Brunei Offshore Basin, which has for-
mations that may hold oil and gas up to
4 kilometers deep.
? The Mekong Delta and Offshore Basin, which
shows formations that are promising for oil and gas
5 to 8 kilometers deep.
which has thin but nromisine sedimentary deposits
... But Uncertain Prospects
Despite the promise of Vietnam's offshore areas,
Hanoi is unlikely to come anywhere near its produc-
tion goals by 1985. Before deciding which areas to
develop, Western oil companies would do much more
work to delineate oilfields. Normally after an initial
discovery, "step out" wells are drilled to delineate the
limits of a field and to allow for reserve estimates.
This process usually takes several years to complete.
In Vietnam none of this work has been done.
More important, Hanoi cannot expect participation
by Western firms, given its track record of heavy-
handed dealings. In 1978, Hanoi brought in three
Western firms-AGIP of Italy, Deminex of West
Germany, and Bow Valley of Canada-to resume
exploration south of Vung Tau. Vietnam's relations
with the companies were disastrous.
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Vietnam: Offshore Basins and Maritime Claims
Vietnamese
maritime
claim line--
China
ong Kong th
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Vietnamese claimed C h I n a
straight baseline
12 November 1982
Boun
necei
Macclesfield
Bank
South
alaysia
oresia
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Soviet oil specialists leave
ever, appeared to be just getting under way
through 1985. Soviet activity as of early 1982 how-
continental shelf.
visited Vietnam and are processing Vietnam's re-
quests for equipment and trained personnel. The
Soviet exploration ship Poisk returned home in May,
probably after adding to seismic data on the southern
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Hanoi's mismana ement carried over into the domes-
tic side as well. the
Vietnamese in 1978 created a National Oil Reserve to
save the most promising exploration areas for Petro-
Vietnam, the state oil company. But areas placed
under the reserve system were left undeveloped. A
wholesale reorganization of PetroVietnam in 1980
appears to have had no impact on domestic develop-
they would need to use over Bach Ho.
bling-block in the short run is offshore platforms
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the Soviets were trying unsuccessfully to 25X1
reactivate rigs near Vung Tau abandoned by Shell in
1975. it could be several
years before the Soviets and Vietnamese together can
construct even the relatively simple fixed structures
the area the
the northern coastline, not currently
targeted for development, appears to have more po-
tential. Soviets are aware of this
and probably will make only a minimal effort to
comply with their exploration agreement with the
Vietnamese.
Outlook
At best, we believe the Soviets will be able to exploit
ment.
Moscow to the Rescue
As relations with the three Western companies deteri-
orated, Hanoi began laying the groundwork for Soviet
involvement. In July 1980 the Soviets agreed to aid in
offshore geological prospecting and oil and gas devel-
opment. A year later the two countries set up a joint
stock company for exploration and development on
the continental shelf. The slow buildup of the Soviet
effort and complaints about the Vietnamese by Soviet
officials, however, suggest that the Vietnamese-Soviet
oil relationship is also experiencing difficulties.
the Soviets will drill 12
exploration and 20 experimental-development wells
3
one or two of the existing finds south of Vung Tau.
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more than 5 to 10 percent of Vietnam's consumption.
It is possible, of course, that Hanoi will develop an
area that has far more oil than preliminary testing
indicates.
the chances of a big hit are extremely slim. In
any case, the Vietnamese themselves have no offshore
oil capability and will have to rely on outside sources
for technical help, material, and financing.
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