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In order to ensure the consistency of the 2020 Investment Law (the Law) with international petroleum industry practices applicable to offshore investment in oil and gas activities, the Government on October 15 promulgated Decree 132/2024/ND-CP to regulate this issue. The new Decree will take effect on December 5 and replace Decree 124/2017/ND-CP dated November 15, 2017, on offshore investment in oil and gas activities (Decree 124).
The new Decree provides the grant of offshore investment registration certificates for oil and gas projects, offshore investment capital in oil and gas activities, and financial obligations of investors.
Procedures for grant of investment registration certificates, management and execution of investment projects
Decree 132 sets out procedures for grant of offshore investment registration certificates for oil and gas projects subject to offshore investment policy approval, stating that such procedures must comply with Article 76 of Government Decree 31/2021/ND-CP of March 26, 2021, detailing and guiding a number of the Investment Law (Decree 31). As for oil and gas projects not subject to offshore investment policy approval, these procedures will be carried out under Article 78 of Decree 31.
The noteworthy change in the new Decree is removal of Decree 124’s provision on shortening of the time limit for appraisal of application dossiers for grant of offshore investment registration certificates for projects subject to offshore investment policy approval as it is inconsistent with the Law. It is not to mention the fact that there has been no project applying for reduction of the appraisal time limit since the enactment of the Law. Moreover, offshore investment in oil and gas activities always requires large investment capital amounts and complex technologies and therefore needs to be prudently considered before being approved.
As stipulated in the new Decree, in order to formulate or implement oil and gas projects abroad, investors may establish, or participate in establishing, executive companies in Vietnam, host countries or third countries in accordance with the laws of host countries and oil and gas contracts.
In case an investor decides to establish an executive company to participate in or implement an oil and gas project abroad on the investor’s behalf, the executive company and the investor will be named in the offshore investment registration certificate. The executive company may use this certificate to facilitate activities related to the implementation of the project.
An investor may use one executive company to manage and execute one or more than one oil and gas project abroad in compliance with regulations of the host country. Expenses for each contract will be distributed and accounted independently. This constitutes one of novel provisions to ensure suitability with the reality.
Offshore investment capital in oil and gas activities
Decree 132 clearly states that offshore investment capital sources in oil and gas activities include money amounts and other lawful assets of an investor, including equity, loans borrowed in Vietnam and transferred abroad, recovered costs, return on equity, and amounts divided from overseas oil and gas projects and retained for offshore investment.
Money amounts and other lawful assets include: foreign-currency amounts on accounts opened at or amounts purchased from licensed credit institutions; Vietnam-dong amounts in accordance with Vietnam’s law on foreign exchange management; machinery, equipment, supplies, materials, fuels, finished and semi-finished commodities; values of intellectual property rights, technologies, brands, and rights to assets; the investor’s shares, capital contributions and projects converted at Vietnam-based economic organizations and overseas economic organizations; and other lawful assets as specified by the civil law.
Offshore investment capital amounts may be used to make capital contributions, pay for purchased shares and capital contributions, and perform underwriting obligations (if any) and other financial obligations of the investor in accordance with the host country’s law, oil and gas contract, license, and other relevant agreements for implementation of oil and gas activities and projects abroad from the stage of project formulation to the stage of project completion and fulfillment of all obligations.
For Vietnamese investors, they may use their shares, capital contributions or investment projects in Vietnam to pay or exchange for shares, capital contributions or oil and gas projects purchased from overseas economic organizations. In this case, Vietnamese investors will carry out procedures for being granted offshore investment registration certificates first, then overseas investors will perform procedures for investment in Vietnam in accordance with law.
Regarding mobilization of capital for overseas oil and gas projects and guarantee for borrowing of loans for project implementation, the new Decree allows investors to authorize their executive companies to mobilize capital from foreign and domestic financial or credit institutions for implementation of the projects in proportion to their capital contributions to such projects in accordance with relevant laws.
For overseas oil and gas projects involving establishment of executive companies and cases in which financial or credit institutions require pledge or mortgage of project assets for loans, investors will be permitted to carry out legal procedures for their executive companies to borrow those loans.
In case financial or credit institutions require investor guarantee, Vietnamese investors will provide guarantee in proportion to their capital amounts in projects in accordance with relevant laws.
The new Decree also specifies the transfer of investment capital abroad, and principles for remittance of foreign currencies abroad before the grant of offshore investment registration certificates. In addition, it guides dossiers and procedures for registration of foreign exchange transactions after the grant of offshore investment registration certificates; and dossiers for registration or notification upon occurrence of changes in foreign exchange transactions after the grant of modified certificates for offshore investment registration.-
Huy Hoang
