The new Oil and Gas Law of Vietnam, which was passed in November last year, will officially come into force on July 1.
Compared to the current law, which was promulgated 30 years ago in 1993, the 69-article Law designs a more convenient and flexible legal framework, which is expected to promote the development of the oil and gas industry in conformity with international practices as well as the country’s realities.
Noteworthily, while the current law provides for only one type of petroleum contract, i.e., production sharing contract, the new law now allows parties to choose to apply “other types of petroleum contracts” so as to suit practical conditions.
The new Law also extends the maximum term of petroleum contracts. Accordingly, the maximum term of a petroleum contract or an ordinary oil and gas block will be 30 years, an extension of five years compared to that specified under the 1993 Law. As for oil and gas blocks entitled to investment incentives or special investment incentives, contracts may be signed with a maximum term of 35 years.
In addition, in order to increase the attractiveness of Vietnam’s oil and gas sector, the new Law says that after a petroleum contract expires, the contractor performing the contract may propose an additional investment plan on increasing raise oil and gas reserves and recovery coefficient and sign a new oil and gas contract on oil and gas extraction in the same contract area with suitable economic and technical conditions.
In order to suit particular characteristics of petroleum activities in Vietnam, the new Law also adds a provision allowing oil and gas field development projects to build comprehensive chains of oil and gas structures and equipment both onshore and offshore. In these cases, PetroVietnam will be required to include the building of these comprehensive chains in outline plans for oil and gas field development for submission to the Ministry of Industry and Trade for appraisal and reporting to the Prime Minister for approval.
Regarding investment incentives, petroleum contracts for oil and gas blocks and fields eligible for investment incentives will enjoy the corporate income tax (CIT) rate of 32 percent, crude oil export duty of 10 percent, and cost recovery level of up to 70 percent of the annual oil and gas production output.
Meanwhile, oil and gas contracts for oil and gas blocks and fields eligible for special investment incentives will be entitled to the CIT rate of 25 percent, crude oil export duty of 5 percent, and cost recovery level of 80 percent, of the yearly oil and gas production output.
The English version of the Law on Oil and Gas is now available in the Official Gazette, issues 133-138 of 2022.- (VLLF)