Under Article 6.1 of the Petroleum Law 2022, Vietnam’s petroleum resources are defined as belonging to the entire people, with the state acting as the owner and unified manager. However, the Petroleum Law 2022 also permits contractors to own a portion of petroleum products, and other products exploited under petroleum contracts, after fulfilling financial obligations as prescribed by law. 

Therefore, the key distinction between public ownership and private ownership concerning hydrocarbon is that all Vietnamese citizens are the owners of hydrocarbon resources, whereas contractors only own hydrocarbon products as stipulated in signed contracts, subject to certain specified conditions.

The government of Vietnam is the highest authority responsible for the unified state management of fundamental petroleum investigation and petroleum operations.

Ministry of Industry and Trade

The Ministry of Industry and Trade (the “MOIT”) is an agency of the Vietnam government, responsible for state management in industry and trade, including the petroleum sector. According to Article 65 of the Petroleum Law 2022, the MOIT is responsible for state management in basic petroleum investigation and petroleum activities. Other ministries, agencies equivalent to ministries, and provincial People’s Committees are also responsible for co-ordinating with the MOIT to implement state management of basic petroleum investigation and petroleum activities.

Commission for the Management of State Capital at Enterprises

The Commission for the Management of State Capital at Enterprises (the “CMSC”) is an agency entrusted by the government to exercise rights and responsibilities to provide opinions, inspect and supervise competent parties regarding the use of capital in petroleum contracts.

Ministry of Natural Resources and Environment

The Ministry of Natural Resources and Environment (the “MONRE”) is an agency of the Vietnam government responsible for carrying out the function of state management in the field of mineral resources. The MONRE is responsible to the government for implementing state management of minerals nationwide, carrying out several tasks as follows: granting, extending and revoking mineral exploration permits and mineral mining permits; and organising auctions of mining rights under its jurisdiction; etc.

The Vietnam Oil and Gas Group (“PetroVietnam” or PVN) is a state-owned enterprise operating within the energy industry, covering both oil and gas as well as renewable energy sectors. PVN plays a crucial role in advancing national economic growth, developing a highly skilled workforce, fostering global integration, and investing abroad.

Under PVN, there are subsidiaries/branches that are appointed to act as operators for offshore blocks in upstream business, such as PetroVietnam Exploration and Production Corporation (the “PVEP”) and Biendong Petroleum Operating Company (the “BDPOC”). 

The Petroleum Law 2022

The Petroleum Law 2022 provides a fundamental investigation of petroleum and petroleum operations within the mainland, islands and territorial waters of the Socialist Republic of Vietnam. It applies to Vietnamese and foreign agencies, organisations and individuals related to the fundamental investigation of petroleum and petroleum operations.

Decree No 45/2023/ND-CP on Elaborating the Petroleum Law (“Decree No 45/2023”)

This provides detailed regulations on several articles of the Petroleum Law, including basic petroleum investigations; petroleum contracts; petroleum operations; documentation, order and procedures for implementing petroleum activities and projects; etc.

The Mineral Law 2010

The Mineral Law 2010 regulates legal issues related to minerals, including petroleum, covering the following areas: basic geological surveys of minerals; protection of unexploited minerals; mineral exploration and exploitation; state management of minerals within the mainland, islands, internal waters, territorial sea, contiguous zone, exclusive economic zone, and continental shelf of the Socialist Republic of Vietnam.

Decree No 158/2016/ND-CP on Guidelines for the Mineral Law

This decree provides detailed guidelines on the following matters: reimbursement of costs for geological baseline surveys of minerals and costs of mineral exploration; requirements for periodical reports on mineral activities; regulations for the appointment and responsibilities of mine managers; certification of the owner’s equity; procedures for mineral planning; etc.

In Vietnam, the production-sharing contract (the “PSC”) executed between PVN and private investors is the primary form of allowed private investment in upstream hydrocarbon activities.

• Under the PSCs, investors gain the right to explore for, develop and produce hydrocarbons within a specified contract area. Investors must comply with the work commitments and expenditure obligations outlined in the PSC. 
• The PSCs must align with the form of contract provided under Decree No 45/2023. 
• The PSCs will be under the MOIT’s verification and the prime minister’s approval for official execution. 
• Parallel with the PSCs, multiple contractors under PSCs will enter into a joint operating agreement (JOA) for the respective oil and gas block. JOAs stipulate the management of the contractor’s activities and specify the corresponding rights and obligations associated with each party’s participating interest in the petroleum operations.
• On the basis of the signed PSCs, the MOIT will issue investment registration certificates to contractors performing petroleum operations.

The PSC of an oil and gas block is issued through a well-defined process managed by PVN, the MOIT and the prime minister. The Petroleum Law 2022 and Decree No 45/2023 regulate the bidding process and requirements for investors to enter into a PSC for oil and gas exploration, development and production.

Bidding for Contractor Selection

The selection of contractors for available oil and gas blocks is made by bidding or direct contracting (in certain circumstances). 

Interested investors must first send the bid registration to PVN. Eligible investors will be entitled to receive invitations to bid and participate in the bidding process. 

Eligibility Requirements for Bidding

The investors must:

• have business registration certificates (in the case of organisation investors) or civil capacity (in the case of individual investors) under the laws of investors’ countries; and
• possess financial and technical capacity as well as experience in petroleum operations (where investors do not meet this requirement, they must establish a consortium with other investors to be eligible to bid).

Qualifications for Contractor Selection

The invitation to bid for each particular oil and gas block will specify the requirements for the bid bond as well as the minimum financial and expertise capacity. According to Article 18 of Decree No 45/2023, general criteria include: 

• The capacity and experience of contractors – including technical and financial capacity, available funding sources for the execution of petroleum operations, and experience in executing petroleum operations and petroleum contracts. 
• Technical conditions – including minimum work obligations (new seismic acquisition, reprocessing of seismogram, quantity of wells), field development and extraction obligations, methods of implementation, and optimal technology for petroleum operations.
• Economic conditions – including taxes, host country’s profit oil/profit gas ratio, participating interests of host country (via PVN) upon making the first commercial discovery, participating interests of PVN or subsidiaries thereof, percentage of costs recovered, and financial commitments.

The typical fiscal terms under PSCs are structured to balance the interests of the government and investors, ensuring the state’s share of profits while encouraging foreign investment in hydrocarbon exploration and production. The following are the key components of the fiscal terms.

• Area limitation and schedule for return of contract area.
• Determination of recoverable costs: contractors are allowed to recover their exploration and development costs from a percentage of the production, typically up to a certain limit.
• Profit oil/gas split: after cost recovery, the remaining production (profit oil/gas) is split between the state (via PVN) and the contractors. The state’s share typically increases with the level of production.
• State participation: PVN often has the right to participate in the project with an equity interest, which can range from 10% to 50%. 
• Taxes and fees: the standard corporate income tax rate for oil and gas activities is 32%, although it can be reduced to 25% for specific projects under certain conditions. Additional taxes may include export duties (if applicable), VAT and environmental fees. The specifics can vary and are typically outlined in the PSCs.

Key Taxes and Fiscal Obligations

Corporate income tax (CIT)

The CIT rate for hydrocarbon upstream activities is 32%. Certain projects, especially those involving deep-water, offshore or complex geological conditions, may qualify for a reduced rate of 25%.

Special petroleum tax (SPT)

SPT is applied to the profits from hydrocarbon production. The rates range from 10% to 50%, depending on the level of profitability and production output.

Royalties

Royalties are imposed on the gross revenue from oil and gas production.

Export duties

These duties range from 10% to 20%, but specific rates can be subject to change and may depend on government regulations at the time of export.

VAT

The VAT standard rate in Vietnam is 8%. However, certain goods and services related to upstream operations may be subject to different rates or exemptions.

Import duties

Duties are levied on the importation of equipment, machinery and materials for exploration and production. Certain exemptions or reductions may apply to goods used directly in oil and gas operations.

Environment protection tax

Rates are defined by the government and are intended to mitigate environmental damage.

Additional fees and contributions

These can include infrastructure development fees, social insurance contributions for employees, and other mandatory government levies.

Regarding upstream licensing, PVN is granted several rights and privileges according to Article 61 of the Petroleum Law 2022. These privileges are intended to ensure PVN’s pivotal position in the exploration for, and extraction of, Vietnamese hydrocarbon reserves.

Key Rights and Privileges Accorded to PVN

Participation rights

Under Article 39 of the Petroleum Law 2022, PVN may use its right to engage in PSCs with the scope of participation interests contingent upon the prime minister’s consideration and decision. In the event that the contractors decide to withdraw from the PSC for unique reasons that have been approved by the prime minister, PVN is specifically allowed to “fully receive transfer” of all the participation rights, data and ongoing upstream projects of the contractors.

Priority rights

Based on the transfer circumstances agreed between the parties’ intention to transfer with a possible transferee, PVN has the right to pre-emptively purchase all or a portion of the participation interests that the contractor intends to transfer in the signed PSCs. 

Operatorship rights

PVN has the right and obligation to manage, operate and exploit petroleum resources effectively while engaging in petroleum operations, in order to preserve resources, the environment and public safety. In some cases, PVN has the right to take over operatorship of the project after a certain period.

Approval of work programmes and budgets

PVN has the authority to approve annual work programmes and budgets; audit the expenses incurred in carrying out petroleum operations in compliance with the terms of PSCs; approve cost allocations in relation to PSCs; etc.

Domestic market obligation

As a contractor operating under a PSC, co-ordinating the sale of the petroleum products of the host nation in addition to the PVN’s petroleum products, PVN is permitted to purchase these products along with those of other contractors involved in PSCs.

Regulatory and advisory role

PVN plays an important role in approving programmes to search for and explore upstream projects, as well as programmes for modified and additional search and exploration, and in approving adjustments to the field development general plan, the plan for early petroleum exploitation, etc.

According to Article 59 of the Petroleum Law 2022, some key local content requirements applicable to upstream operations by private investors include the following:

• General obligation – fulfilling obligations under oil and gas contracts, as well as disclosing and paying taxes, fees and levies in compliance with Vietnamese laws.
• Employment and technology transfer – training and hiring Vietnamese employers, as well as securing the lawful and legitimate rights and interests of these employers.
• Environmental protection and national defence and security – adhering to the legislation pertaining to these areas; putting environmental protection and safety measures in place for petroleum operations; implementing regulations and guidelines on cost, and economic and technical norms issued by state management bodies.
• Reporting requirement – reporting to the state management agencies, PVN and competent tax agency when a transfer operation leads to a change of ownership of the contractor holding participation rights in a PSC in Vietnam.
• Capital contribution obligation – making payment for petroleum operations in accordance with the terms of the PSC by transferring capital contributions to the operation account established by the operator or the operator’s executive office in Vietnam.

Once the contractor has a commercial discovery, some key requirements include:

• The contractor must submit a written notice to PVN about the commercial discovery that can be exploited economically. 
• The contractor is permitted to retain the gas-discovery area even after announcing a commercial discovery if there is no market for consumption and no requirement for suitable pipelines and treatment facilities. With consent from the MOIT, the gas-discovery area may be retained for a maximum of five years. The prime minister will consider allowing an extension of the gas-discovery area’s retention period, but only for another two years, based on the MOIT’s appraisal, in the event that the term of retention expires and there is still no market for consumption and no requirement for suitable pipelines and treatment facilities. 

Other key terms of the current template of the PSC include:

• Exploration phase – according to Article 31 of the Petroleum Law 2022, the exploration term can be no more than five years, or no more than ten years, depending on the term of the petroleum contracts.
• Development phase – the contractor creates the petroleum development plan and submits it to PVN, which then submits a report to the MOIT for appraisal and approval, following the approval of the general petroleum development plan or before the conclusion of the early petroleum exploitation plan’s implementation term.
• Minimum work programmes – contractors must commit to a minimum work programme, which includes seismic surveys, drilling of exploration wells, and other geological and geophysical studies.
• Extensions – the term of a PSC may be extended but may not exceed five years. The term of the exploration period may be extended but may not exceed five years, based on the approval of the MOIT. In special cases, for reasons of national defence, security, complex geological conditions, unique field operation challenges, or to ensure effective gas extraction time, the prime minister may approve an additional extension of the PSC term.

Article 34 of Decree No 45/2023 regulates dossiers and processes for assessment and approval for the implementation of participation interests, the priority right to pre-purchase participation interests, and receive participation interests in PSCs as follows:

• PVN requests permission to exercise participation interests in PSCs or the priority right to pre-purchase participation interests that contractors intend to transfer in signed PSCs, or to assume all rights of the contractor if the contractor decides to withdraw from the PSC for special reasons for appraisal. PVN submits two dossiers to the MOIT in accordance with the terms agreed upon between the contractor and PVN. 
• Within five working days from the date of receiving the valid dossiers, the MOIT sends the dossiers to the relevant ministries for their opinion. 
• The relevant ministries provide written comments to the MOIT on the content falling under the purview of their state administration within 15 days from the date on which they received the dossiers.
• Within 45 days from the date of receiving the valid MOIT dossiers, the appraisal of the request to exercise the participation interests or the pre-purchase participation interests or to receive the participation interests in the petroleum contract must be complete, and PVN must submit the dossiers to the prime minister for consideration and approval.

In addition to the regulations on documents and procedures mentioned above, the system for management, accounting, use of assets, and receipt of all participation benefits from contractors in unusual instances are described in Article 38 of Decision No 45/2023:

• PVN obtains all the contractor’s participation interests in the PSCs and receives information, data, dossiers, samples, petroleum works, and other assets (if any) in their original form in accordance with the signed PSCs. 
• In order to retain the PSCs, PVN creates an annual management cost plan, monitors the assets and expenses for associated difficulties that may be developing, and the board of members of PVN approves the audit results.

Government Approval and Control

The production rates and levels are typically governed by the terms outlined in the PSCs between the Vietnamese government (represented by PVN) and the contractor. The PSC specifies the production levels and schedules agreed upon during the development phase.

Environmental Considerations

Before production begins, operators are required to conduct environmental impact assessments. The findings from these assessments may influence production rates, to mitigate adverse effects on the environment.

State-Level Proration or Allocation

In some cases, the government may allocate production quotas among operators to ensure equitable distribution of benefits and adherence to national production targets.

No OPEC-Like Quotas

Vietnam does not participate in international production quotas like those enforced by OPEC (Organization of the Petroleum Exporting Countries). Therefore, production decisions are primarily guided by domestic policy and market dynamics.

There is no government or private monopoly in midstream operations in Vietnam. The ownership of midstream operations is arranged among those who ship the hydrocarbons and the transporters for different blocks, and this varies from one field to another.

Under Article 21 of the Law on Investment 2020, there are five forms of investment in Vietnam.

Forms of Investment Under Article 21 of the Law on Investment 2020

Investment in the establishment of a business organisation

• Investors must comply with the provisions of the Law on Enterprises 2020 and domestic laws corresponding to each type of economic organisation.
• Foreign investors, in particular, when investing in conditional business lines, must also comply with market access conditions, including: investment forms; scope of investment activities; the charter capital ownership ratio of foreign investors in economic organisations; and investor capacity. 

Investment in the form of capital contribution or purchase of shares or stakes

• Investors must meet the conditions and carry out procedures for changing members and shareholders corresponding to each type of business organisation.
• In the case of foreign investors, the investor must obtain approval from investment authorities on meeting the conditions for capital contribution and share purchase as prescribed by law.

Execution of an investment project

• A foreign-invested enterprise that is already established in Vietnam can undertake a variety of investment projects, including establishing another economic organisation.
• Depending on the foreign capital ownership ratio, investors will conduct investment procedures for domestic investors or foreign investors. 

Investment in the form of a business co-operation contract (BCC)

• A BCC is a contract signed between investors for business co-operation, profit distribution and product distribution without establishing an economic organisation. 
• The parties to a BCC establish a co-ordination board to carry out the BCC. 

Other new forms of investment and types of business organisations as prescribed by the government’s regulations

Some new forms of investment prescribed by government regulations apply to investment projects in both midstream and downstream operations.

As stated in 3.1 Forms of Private Investment: Midstream/Downstream, there is no national monopoly (or near monopoly) for downstream operations. Currently, Vietnam has only two refineries, Nghi Sơn Refinery Plant (NSRP) and Binh Sơn Refinery (BSR), in the middle of Vietnam. NSRP is owned by consortiums of PVN and international partners, while BSR is a joint stock company that is more than 90% owned by PVN. 

Investors wishing to invest in petroleum midstream and downstream operations must comply with the Law on Investment 2020 and the Law on Enterprise 2020. The licensing procedures involve several steps.

Step 1: Registration of Investment Project – Obtaining the Investment Registration Certificate (IRC)

Application dossier

Investors must prepare and submit an application dossier for an IRC to the relevant authority. This includes:

• a written request for the implementation of the investment project;
• documents on the investor’s legal status;
• documents on the financial capacity of the investor;
• a proposal for the investment project; and
• other documents as required by law depending on the type and scale of the project.

Authority

The application is submitted to the Department of Planning and Investment (DPI) or the management board of Industrial Parks, Export Processing Zones, Hi-Tech Parks, or Economic Zones where the project is located.

Timeline

The authority has 15 days from the date of receipt of a complete dossier to issue the IRC.

Step 2: Establishment of a Legal Entity – Obtaining the Enterprise Registration Certificate (ERC)

Application dossier

To establish a company (eg, a joint stock company or a limited liability company), investors must prepare and submit an application for an ERC. This includes:

• an application form for enterprise registration;
• the company’s charter;
• a list of members (for an LLC) or founding shareholders (for a JSC);
• copies of the legal documents (identification documents of a person; the Establishment Decision, Certificate of Enterprise Registration or equivalent document of an enterprise) of the members or shareholders; and
• the IRC (if the investment project involves the establishment of a new enterprise).

Authority

The application is submitted to the Business Registration Office under the DPI.

Timeline

The Business Registration Office has three working days from the date of receipt of a complete dossier to issue the ERC.

Step 3: Licences for Petroleum Midstream and Downstream Operations

Application dossier

Depending on the specific activities (eg, refining, storage, transportation, distribution), additional licences and approvals are required. Typical dossiers include:

• an application form;
• the IRC and ERC;
• technical and environmental protection plans; and
• other documents as specified for the particular type of petroleum operation.

Authority

Applications are submitted to the MOIT and other relevant authorities as needed.

Timeline

The timeline for these licences varies based on the type and complexity of the operation, but generally ranges from 30 to 60 days.

Step 4: Compliance With Environmental Regulations Through an EIA

Application dossier

Investors must prepare and submit an EIA report. This includes:

• a written request for approval of the EIA report;
• the EIA report itself, prepared by a licensed organisation; and
• other supporting documents.

Authority

The MONRE or the provincial-level People’s Committee.

Timeline

The review and approval process can take up to 45 working days.

Step 5: Construction Permits and Other Approvals

Construction permits:

Application dossier

This must include detailed construction plans, the IRC, ERC, and other necessary documents.

Authority

The Department of Construction or the local People’s Committee.

Timeline

Typically issued within 30 days from the date of receipt of a complete dossier.

Other relevant approvals:

Investors may need additional approvals related to fire prevention and fighting, labour, safety, and other operational aspects.

The following are the typical commercial arrangements for the major types of midstream and downstream operations.

Joint Venture Agreements (JVAs)

• Foreign investors often enter into joint ventures with state-owned enterprises (SOEs) or local private companies.
• Foreign investors typically hold a significant equity stake but must comply with foreign ownership limits if applicable.
• JVAs must comply with the Law on Investment and the Law on Enterprises. They must also obtain the necessary licences from the MOIT.

Build-Operate-Transfer (BOT) Contracts

• Investors build a refinery or petrochemical plant, operate it for a certain period, and then transfer ownership to the Vietnamese government.
• The operation period is usually agreed upon in the contract.
• BOT projects require specific approval from the prime minister and must adhere to BOT regulations under Vietnamese law.

Leasing Agreements

• Investors lease storage facilities (eg, tanks, terminals) from SOEs or private entities.
• Terms and duration are negotiated between the parties, typically ranging from short-term to long-term leases.
• Leasing arrangements must comply with the Civil Code and other relevant commercial laws.

Service Contracts

• Companies provide transportation services (eg, pipeline, trucking, shipping) for petroleum products.
• Payment can be based on volume transported or other agreed metrics.
• Service contracts must adhere to transportation and logistics regulations, including safety and environmental standards.

Distribution Agreements

• Investors enter into agreements with local distributors to market and sell petroleum products.
• Agreements can be exclusive or non-exclusive, depending on the market strategy.
• Distribution agreements must comply with the Commercial Law and regulations on petroleum trading.

In Vietnam, businesses might be subject to a complex array of tax obligations, comprising corporate income tax (CIT), VAT, and export-import tax. These taxes are further complicated by a robust regulatory framework that undergoes frequent updates.

Corporate Income Tax (CIT)

Under normal circumstances, the CIT rate is 20%.

VAT

The standard rate is 10%, applying to all activities except for those not subject to VAT, exempt or subject to 0% or 5%.

Import-Export Duties

Export duties: the standard rate ranges from 0% to 40%, applying to activities related to a few items, primarily natural resources including sand, chalk, marble, granite, ore, crude oil, forest products, and scrap metal.

Import duties: the standard rate on imported goods is 10%, although preferential rates, and special preferential rates, may be applied on a case-by-case basis. 

Environmental Protection Tax (EPT)

EPT rates for petroleum products are:

• gasoline – VND2,000 per litre (until 31 December 2024) changing to VND4,000 per litre (from 1 January 2025);
• diesel – VND1,000 per litre (until 31 December 2024) changing to VND2,000 per litre (from 1 January 2025); and
• other petroleum products – VND1,000 to VND2,000 per litre, depending on the product.

Special Sales Tax (SST)

SST, also known as excise tax, applies to specific goods and services deemed luxury or non-essential, including petroleum products. The SST rates for petroleum products are:

• gasoline – 10%;
• E5 gasoline – 8%; and
• E10 gasoline: 7%.

PVN does not have special rights in the approval of midstream/downstream licences, but it is joining as a partner to the implementation of the project through subsidiaries. PVN also has the right to approve matters concerning oil and gas operations, which may include matters related to midstream/downstream operations. 

Currently, midstream and downstream petroleum activities that take place after the initial production stage, including the transportation and processing of petroleum into gasoline, diesel and other fuels, are regulated by the relevant legal system:

• Petroleum Law 2022; 
• Law on Investment 2020;
• Law on Construction 2014;
• Law on Export and Import Duties 2016;
• Decree 45/2023 ND-CP dated 1 July 2023;
• Decree 85/2022/NĐ-CP dated 24 October 2022; and
• Circular No 36/2016/TT-BTC dated 26 January 2016.

Refining

• Scope of operations: clearly defines the types of refining or petrochemical processes allowed.
• Capacity and output: specifies the approved production capacity and types of products.
• Technical standards: must comply with national and international standards for safety, technology and environmental protection.
• Environmental compliance: requires an approved EIA and adherence to environmental protection laws.
• Safety regulations: compliance with safety regulations, including fire prevention and response plans.
• Investment commitment: details the capital investment and timelines for project completion.
• Reporting obligations: regular reporting on operations, safety incidents, and environmental impact to the MOIT and other relevant authorities.

Storage

• Storage capacity: specifies the approved storage capacity for petroleum products.
• Types of products: lists the types of petroleum products that can be stored.
• Technical and safety standards: must meet national and international standards for storage facilities, including design, construction, and operational procedures.
• Environmental compliance: requires EIA approval and adherence to environmental protection regulations.
• Safety measures: compliance with safety regulations, including spill prevention and emergency response plans.
• Operational reporting: regular reporting on storage operations, safety incidents, and environmental impact.

Transportation

• Transport modes: specifies the modes of transport allowed (eg, pipeline, road, rail, sea).
• Technical standards: compliance with technical standards for transportation infrastructure and equipment.
• Safety and environmental standards: must meet safety and environmental standards for transporting hazardous materials.
• Operational routes: defines approved transportation routes and logistics plans.
• Emergency response: requires plans for accident response, spill containment, and other emergencies.
• Reporting obligations: regular reporting on transportation activities, safety incidents, and compliance with regulations.

Distribution and Retail 

• Scope of distribution: specifies the regions and market segments for distribution and retail activities.
• Product range: lists the types of petroleum products approved for distribution and retail.
• Retail standards: must comply with standards for retail operations, including service quality, safety and environmental protection.
• Facility requirements: specifies requirements for retail outlets, including design, safety features and environmental protection measures.
• Pricing regulations: adherence to pricing regulations and reporting on price adjustments.
• Operational reporting: regular reporting on sales, inventory, safety incidents and compliance with regulations.       

Private investors in Vietnam do not have condemnation or eminent domain rights. The acquisition of land for private investment projects is facilitated through state mechanisms, where the state retains the authority to expropriate land and manage compensation and resettlement. Private investors must work with state authorities and follow legal procedures to obtain land use rights, ensuring compliance with the Land Law and related regulations. For large-scale projects, especially those involving significant public interest or infrastructure development, co-ordination with government authorities is essential to navigate the complexities of land acquisition.

Hydrocarbons are classified as dangerous goods under Appendix 01 of Decree 34/2024/ND-CP dated 31 March 2024. 

The management and operation of hydrocarbon transportation pipelines are mainly the responsibility of the investor and gas transportation pipeline operator. This is specifically stipulated in regulations on ensuring the safety of gas transportation pipeline systems on land (issued with Decision No 46/2004/QD-TTg dated 26 March 2004 of the prime minister). 

In Vietnam, third-party access to midstream and downstream petroleum infrastructure is regulated to ensure fair competition, efficiency and transparency in the market. The MOIT is the primary regulatory body responsible for overseeing the petroleum sector, including the enforcement of access rights and regulatory compliance. Currently, services in the oil and gas industry are highly specialised and segmented by market. Although the MOIT and the Vietnamese government provide timely guidance and updates, there are no clear and specific regulations addressing this issue specifically for the oil and gas sector.

Licensing and Other Requirements

Trading licence

Companies involved in the importation and wholesale and retail distribution of petroleum products must obtain a business licence from the MOIT.

Sub-licences

Additional licences may be required for specific activities such as wholesale distribution, retail operation of petrol stations, and storage of petroleum products.

Compliance with quality standards

Petroleum products must meet national technical standards and regulations. The Ministry of Science and Technology (MOST) and the MOIT set these standards.

Quality control

Regular testing and certification of petroleum products are mandatory to ensure compliance with quality standards.

Price stabilisation

The government regulates the pricing of petroleum products to avoid market volatility. The Ministry of Finance (MOF) and the MOIT periodically adjust prices based on global market trends and domestic economic conditions.

Price cap

A price cap may be imposed on certain petroleum products to protect consumers from price surges.

Import licensing

Companies must obtain import licences for petroleum products from the MOIT. This includes complying with import quotas and other regulatory requirements.

Import quotas

The government may impose quotas on the importation of petroleum products to control supply and stabilise the market.

Retail licensing

The establishment and operation of petroleum retail stations require approval from local authorities and the MOIT. This includes meeting location, design, and safety requirements.

Environmental standards

Petroleum businesses must comply with the environmental protection laws and standards set by the MONRE. These include obtaining EIA approvals for storage and distribution facilities.

Pollution control

Measures must be in place to prevent and control pollution arising from petroleum storage, transportation, and distribution activities.

Regular reporting

Businesses must regularly report their operations, including import and export activities, inventory levels, and sales data, to the MOIT and other relevant authorities.

The import and export processes involve obtaining specific authorisations and adhering to certain limitations and prohibitions. The following are the key laws, regulations and authorisations that apply to the import and export of crude oil, natural gas and petroleum products.

• Petroleum Law: this governs the exploration, extraction and export of crude oil and natural gas.
• Commercial Law: this regulates the trading of goods, including petroleum products, within and outside Vietnam.
• Investment Law: this provides the legal framework for foreign and domestic investment in the petroleum sector.
• Decree No 83/2014/ND-CP, amended and supplemented by Decree 95/2021/ND-CP on Petroleum Business, Circular 69/2016/TT-BTC on Finance on customs procedures for petrol, oil, chemicals and gas imported, exported, temporarily imported for re-export, in border-gate transfer and in transit; materials imported for production, preparation or export processing of petrol, oil or gas; imported and exported crude oil; and goods imported or exported to serve petroleum activities, etc: these outline the conditions for importing and exporting petroleum products.

Transferring midstream and downstream operations and assets in Vietnam includes conducting thorough due diligence, obtaining the necessary regulatory approvals, complying with competition laws, executing transaction agreements, and ensuring post-transaction compliance.

Typical Process to Transfer Midstream/Downstream Operations Between Private Parties

• Memorandum of understanding (MOU) or letter of intent (LOI) – this establishes the intention of both parties to engage in a transaction, outlining the basic terms and conditions.
• Review of corporate documents, licences, compliance records, contracts, and any ongoing litigation or disputes is necessary for legal due diligence.
• Assessment of financial statements, tax records, financial obligations, operational processes, asset conditions, and technological standards is necessary to comply with financial and operational due diligence.
• Transaction structuring is achieved by executing an asset purchase agreement (APA) or share purchase agreement (SPA).
• Regulatory approvals, including IRC and ERC amendment and sector-specific approvals, need to be obtained.
• Post-transaction compliance needs to be completed, including notifying tax authorities and updating internal records.

Typical Issues That Arise in Connection With Transfers

These include:

• the duration and legality of existing operational permits;
• adherence to foreign ownership limits in industries such as energy and oil;
• the complexities of transferring assets due to complex legal regulations; and
• challenges in adhering to and implementing tax regulations, particularly for cross-border transactions, especially capital gains tax.

Foreign investment in hydrocarbons in Vietnam is governed by both the Petroleum Law 2022 and the Law on Investment 2020 to attract foreign investors and safeguard national interests.

Foreign Investment Review Processes

For upstream operations

• Foreign investors must participate in the bidding process of contractor selection to sign a petroleum contract with PVN.
• Based on the contractor selection result, PVN will submit the petroleum contract to the MOIT for appraisal and to the prime minister for approval.
• The MOIT will issue IRCs to contractors performing oil and gas operations.

For midstream/downstream operations

• Foreign investors must obtain an IRC from the Department of Planning and Investment or the Management Board of Industrial Zones, depending on the location and scale of the project.
• In addition to the IRC, an ERC is required to establish a legal entity in Vietnam.
• Large-scale and sensitive projects, such as those in the oil and gas sector, often require additional approvals from the prime minister or relevant ministries (eg, the MOIT).

Restricted Investments

The oil and gas sector is subject to specific conditions:

• foreign ownership is often capped at certain levels;
• joint ventures with state-owned enterprises such as PVN are common; and
• participation in upstream activities (exploration and production) generally requires entering into PSCs or JOAs with PVN.

Incentives and Protections for Foreign Investment

Tax incentives

Investors in the oil and gas sector can benefit from preferential CIT rates, tax holidays, and reductions. For instance, an investor in an oil and gas block that meets the criteria for receiving special investment incentives, may enjoy favourable tax treatment, including a reduced CIT rate of 25%, a lower crude oil export tax rate of 5% and a maximum cost recovery rate of 80% of oil production.

Exemption from import and export duties

Investors are entitled to exemption from import and export tariffs to serve petroleum operations. 

Protection against expropriation

The Law on Investment 2020 provides that foreign investors are protected against nationalisation or confiscation of assets. Expropriation is only allowed in very exceptional cases for national defence and security, with fair compensation provided.

There are no current sanctions in place with respect to investing in oil and gas assets or conducting business in the oil and gas sector in foreign jurisdictions.

Principal Environmental Laws

The current environmental law in Vietnam is the Law on Environmental Protection 2020, which regulates environmental protection activities; the rights, obligations and responsibilities of agencies, organisations, residential communities, households, and individuals involved in environmental protection activities. 

The Law on Environmental Protection 2020 includes a number of important provisions that affect the oil and gas sector. Oil and gas companies must strictly comply with regulations on waste and emission management, and develop environmental emergency response plans, especially for oil spills. Additionally, oil and gas projects must undergo an EIA before being granted an operating licence. All of this is to ensure that oil and gas exploration and processing activities are conducted sustainably and with minimal environmental impact.

In addition to the Environmental Protection Law 2020, the government has issued a number of decrees to guide its implementation, including Decree No 08/2022/NĐ-CP of 10 January 2022, on the elaboration of several articles of the Law on Environmental Protection; Decree No 45/2022/NĐ-CP of 7 July 2022, on penalties for administrative environmental protection offences; and Decree No 27/2023/NĐ-CP of 31 May 2023, on environmental protection fees for mineral extraction. Moreover, several circulars issued by ministries and departments elaborate on the application of the Law on Environmental Protection 2020’s regulations in respective areas.

Vietnam’s Environmental Management Agencies

The environmental management agency in Vietnam is structured at each level of government. 

• The MONRE (monroe.gov.vn) is the central government agency responsible for managing the state’s natural resources and environmental issues. The MONRE has five main departments: the General Department of Environment, the Department of Environmental Impact Assessment and Appraisal, the Department of Biodiversity Conservation, the Department of Waste Management and Environmental Improvement, and the Department of Pollution Control. 
• Each province has its own Department of Natural Resources and Environment. 
• Each district has its own Office of Natural Resources and Environment. 
• At the commune level, there are officials responsible for natural resources and the environment.

According to the government’s guidance in Decree No 45/2023/ND-CP on elaborating the Petroleum Law, the project investor, before commencing the hydrocarbon project, is obliged to prepare, submit for appraisal, and obtain approval for the EIA report in accordance with environmental protection laws.

In the EIA, the project investor must conduct consultations with the affected community, individuals directly impacted by the project, and agencies and organisations directly related to the project through postings on electronic information portals, organising meetings to collect opinions, or gathering written opinions. The results of these consultations provide important information for the project investor to study and use to propose solutions to mitigate the project’s environmental impact and finalise the EIA report.

The appraisal and approval process for the EIA report by the competent authorities usually takes up to three months. The decision to approve the appraisal results of the EIA report is one of the bases for obtaining an environmental permit.

Offshore development must comply with the following EHS processes and requirements.

Environmental Impact Assessment (EIA)

• Offshore oil and gas projects must conduct a comprehensive EIA as required by the Law on Environmental Protection. The EIA must be approved by the MONRE.
• The EIA should include assessments of potential impacts on marine ecosystems, water quality, air quality, and socio-economic factors.

Hydrocarbon Exploration Programmes

• These programmes are developed by offshore oil and gas contractors during the period of hydrocarbon exploration to submit to PVN for appraisal and approval.
• The programme must cover the plan for implementation of safety and environmental protection, including safety and incident handling, and solutions to prevent and handle pollution risks.

Field Development Plans (FDPs)

• The FDPs are prepared on the basis of the approved outline field development plans (“ODPs”) and early field development plans (“EDPs”).
• Contractors must prepare and submit an FDP to PVN, which then submits a report to the MOIT for appraisal and approval.
• The FDPs include plans for the protection of resources, the environment, and ecology, outlining safety and incident handling, and solutions to prevent and handle pollution risks and decommission petroleum installations.

Decommissioning Plans

Project contractors must conduct assessments of the suitability of the waste management and marine pollution control plan, environmental monitoring plan, environmental incident prevention and response plan, and safety assurance plan, when preparing the decommissioning plan after ending each phase or terminating the petroleum contract.

Safety Requirements

Project owners involved in offshore oil and gas exploration and exploitation must also comply with safety requirements including:

• establishing safety zones and maintaining safety signals for oil and gas structures and machinery;
• refraining from constructing structures, launching floating vessels, or establishing safety zones around structures or vessels in areas that could obstruct recognised essential international maritime traffic routes;
• establishing a safety management system and implementing safety measures in accordance with the approved safety management programme;
• updating data and finalising risk assessment reports and emergency response plan implementation reports;
• implementing measures to ensure occupational safety and fire prevention and fighting in accordance with legal regulations;
• being equipped with warning systems to detect possible negative circumstances causing harm to installations and the environment, and automatically giving notice of normally unmanned offshore petroleum installations to operation centres; and
• preparing emergency vessels to ensure timely rescue in cases of emergency in respect of normally manned offshore petroleum installations.

Decommissioning Plans

Operators must prepare and submit a decommissioning plan for approval well in advance of the planned decommissioning activities. This plan typically needs to be submitted at least one year before the cessation of production.

The scope of the decommissioning plan includes the plugging and abandonment of wells, removal of facilities and infrastructure, site restoration, and environmental remediation.

The plan should detail the technical, safety and environmental measures to be implemented during the decommissioning process. The plan must also include a schedule of activities and cost estimates, and a description of the methods and technologies to be used.

The decommissioning plan must be submitted to the MOIT for review and approval. Approval is contingent on the plan meeting all regulatory requirements and demonstrating that decommissioning activities will be conducted in a manner that ensures safety and environmental protection. The MOIT may require modifications to the plan before approving.

Bond or Financial Security

Operators are required to provide financial security to cover the costs associated with decommissioning. This can be in the form of a bond, a decommissioning fund, or other financial instruments acceptable to the MOIT.

The amount of the financial security is determined based on the estimated cost of decommissioning and must be sufficient to cover all decommissioning obligations.

The financial security must be provided at the commencement of the petroleum project or at a specific milestone agreed upon with the MOIT.

Operators are required to maintain financial security throughout the life cycle of the project until decommissioning is completed to the satisfaction of the authorities.

Non-operator Liability

Non-operators (eg, joint venture partners) share liability for decommissioning activities proportionate to their interest in the project. They are jointly and severally liable for ensuring that decommissioning is carried out in compliance with the approved plan and regulatory requirements.

Prior-Owner Liability

Prior owners or operators retain certain liabilities even after fully divesting their ownership interest in a petroleum licence. This includes liability for any environmental damage or non-compliance that occurred during their period of ownership.

The transfer of ownership must be approved by the MOIT, and the new owner must demonstrate the capability to meet all its decommissioning obligations.

Retained Liabilities

Retained liabilities include any unresolved environmental issues or decommissioning obligations that were not adequately addressed during the ownership period.

The original owner may be required to contribute to the decommissioning fund or provide additional financial security to cover these retained liabilities.

The Vietnamese legal system currently does not have a specific law on climate change. However, relevant provisions in other legal documents addressing GHG emission reduction and environmental protection impact the oil and gas industry. These regulations require oil and gas projects to conduct EIAs and implement measures to prevent and respond to environmental incidents. Additionally, Decision No 896/QD-TTg, dated 26 July 2022, approving the National Strategy for Climate Change until 2050 by the prime minister, sets GHG emission reduction targets for Vietnam, which may indirectly affect oil and gas activities. These measures promote environmental responsibility within the sector, contributing to Vietnam’s broader climate change mitigation efforts.

In Vietnam, local governments must comply with the regulations, policies and directives from the central government related to oil and gas development. However, local governments can impose restrictions on oil and gas activities based on environmental or community safety factors, as long as they are in accordance with national legal regulations. Accordingly, local authorities can undertake to:

• implement and monitor environmental protection regulations within the locality, including granting environmental licences, revoking environmental licences according to authority, and monitoring and handling environmental violations on oil and gas projects; and
• participate in assessing, approving or proposing measures to minimise environmental impacts when oil and gas projects conduct EIAs.

The Petroleum Law covers both conventional and unconventional oil and gas resources. Therein, unconventional oil and gas are defined as coal gas, oil shales, shale gas, natural gas hydrates, bitumen, or other possible forms. The state of Vietnam has investment incentives to encourage exploration, development and extraction of unconventional oil and gas. Therefore, oil and gas blocks that contain unconventional oil are among those that receive special investment incentives.

Investment incentives for unconventional oil and gas exploration promote energy supply diversification and reduce reliance on traditional energy sources. While traditional energy sources hold a current market advantage, developing unconventional oil and gas resources presents both promising prospects and challenges. Unconventional oil and gas have the potential to become a new revenue stream for the government, contributing to economic development.

Vietnam is in the early stages of its energy transition, and there are ongoing efforts to utilise oil and gas upstream and midstream assets for energy transition projects such as carbon capture, utilisation and storage (CCUS); renewable natural gas (RNG); sustainable aviation fuel (SAF); and hydrogen. While utilisation is currently limited, several pilot projects are in progress, such as the Block B, Blue Whale, and Son My LNG-to-power project chains​.

Advanced technologies are being adopted in upstream and midstream operations to minimise GHG emissions, and there are support programmes for developing renewable energy sources like wind and solar power. Vietnam is also working on creating a legal framework, financial support mechanisms and tax incentives to encourage the energy transition​.

The transition towards cleaner energy sources is significantly reshaping Vietnam’s traditional oil and gas sector. The Vietnamese government adjusted the National Power Development Plan in Decision No 500/QD-TTg dated 15 May 2023, reducing the proportion of coal-fired thermal power and increasing the development of renewable energy. This shift has prompted state-owned entities like PVN to diversify into renewables such as wind and solar power, potentially diminishing investments in conventional oil and gas ventures.

In addition, Vietnam is currently focusing on developing LNG projects and boosting the development of natural gas infrastructure, which is seen as a transition fuel in the energy transition process. At the same time, it is increasing investment in research and development of emission reduction technologies, carbon capture and storage. The energy transition is creating significant changes in the traditional oil and gas industry in Vietnam, from policy and planning to specific business operations. This requires adaptation and innovation from stakeholders to ensure the sustainable development of the industry in the new context.

Currently, there is no specific programme in Vietnam dedicated to unconventional upstream interests. Exploration and exploitation activities for oil and gas in general are still subject to the provisions of the Petroleum Law 2022 and detailed guiding documents.

Decision No 500/QD-TTg dated 15 May 2023, approving national electricity development planning for 2021–2030 and the vision for 2050, outlines national electricity development solutions, including prioritising the development of electricity sources from imported LNG on an appropriate scale. In this Decision, projects utilising LNG with matching LNG import infrastructures and utilising modern technology are developed. The Decision also promulgates a list of LNG thermal power plants considered as priority electricity sources for investment in the electricity sector.

The Politburo’s Resolution No 55-NQ/TW dated 11 February 2020 on orientations of strategy for national energy development by 2030 with a vision towards 2045, sets out tasks to develop primary energy sources towards autonomy, diversification, efficiency, reliability and sustainability. These tasks focus on developing the gas industry and prioritising investment in the technical infrastructure for LNG import and trade. Additionally, the resolution emphasises using LNG for gas-fired power generation to enhance the role of gas-fired power and regulate the power system.

Recognising the crucial role of the oil and gas industry in the socio-economic development of the country, the government of Vietnam has implemented numerous preferential policies to attract foreign investment in this sector. This is a strategic move to effectively exploit the vast potential of oil and gas resources, particularly natural gas and LNG, in the East Sea area.

With a national energy development orientation towards sustainable goals, Vietnam is prioritising the development of clean and environmentally friendly energy sources. In the context of the traditional fossil fuel supply increasingly depleting and the escalating negative impacts of climate change, natural gas and LNG emerge as potential alternative energy solutions.

In addition to resource potential, Vietnam has many other advantages that attract foreign investors to the oil and gas sector. These include a stable and open investment environment, a well-established legal system, a high-quality workforce, and a large domestic-consumption market.

On 1 July 2023, the Petroleum Law 2022 officially came into effect. This was an important event for the legal field related to the oil and gas sector. This law provides for fundamental investigation of petroleum and petroleum operations within the mainland, islands and territorial waters of the Socialist Republic of Vietnam. 

In addition to adjusting and supplementing some basic content from previous versions of the Petroleum Law, the newest Petroleum Law fully institutionalises the policies of the party and the state, and is in accordance with international treaties to which Vietnam is a signatory, ensuring feasibility, consistency and coherence with the current legal system.

Accordingly, Decree No 45/2023 has also been issued by the government to elaborate on the Petroleum Law 2022, along with two appendices on the Model Petroleum Product Sharing Contracts (PSCs) and the Accounting Procedures for PSCs.