Energy and Resources

There are various natural energy resources in Vietnam, including coal, crude oil, gas, geothermics, hydropower, biomass energy, wind power and solar energy.
 
1. Oil and gas
 
Key state agencies
The Ministry of Industry and Trade (“MOIT”) is the specialized authority taking charge of guiding, supervising and licensing the oil and gas industry. Vietnam Oil & Gas Group, internationally known as Petro Vietnam (“PVN”), is a state owned company with monopoly rights to carry out upstream operations and signing petroleum contracts upon approval of the Prime Minister.
 
Legislation
Law on petroleum (promulgated in 1993 and amended in 2003 and 2008), the principal legal instrument, together with guiding regulations are prevailing regulations that govern oil and gas industry in Vietnam.
 
 "Entryways"
To invest in petroleum operation in Vietnam, investors can choose either by means of bidding to be a contracting party of a petroleum contract or acquiring rights and obligations of contracting parties in existing oil and gas fields.
 
Before investors enter into petroleum contracts, it is required to tender for implementing oil and gas operations. The forms of tender include public tender, competitive tender and appointment of contractors. Upon the tender result approved by the Prime Minister, PVN will negotiate and sign the petroleum contracts.
 
On the other hand, grounding on the petroleum contract and related contracts, the preemption of PVN and other contracting parties, rights and obligations may be assigned. The assignment must go through the approval process of the Prime Minister and only takes effect as from the date of an amended investment registration certificate issuance to demonstrate the transfer.
 
Duration
The duration of the petroleum contacts is 25 years at most, except for incentivized projects. The maximum duration of a natural gas project is 30 years. And the exploration period does not exceed 5 and 7 years respectively. In special cases, the Prime Minister shall consider and decide the duration of the contracts.
 
Since the Renovation of Vietnam (1986), Vietnamese government has encouraged foreign organizations and individuals to invest capital and technologies in conducting petroleum activities. To draw more investments to oil and gas industry, now the government and other national agencies is proposing more polices on incentives and assistance for investors.
 
2. Other minerals
 
Minerals exploration and mining in Vietnam are subject to provisions of Law on minerals 2010
and detailing regulations.
 
2.1 Exploration
Legal entities having registered mineral exploration as their business line may be licensed to conduct minerals exploration, which are enterprises, cooperatives, unions of cooperatives, and business households duly established pursuant to Vietnamese laws, foreign enterprises having representative offices or branches in Vietnam.
 
Only enterprises, representative offices, branches and cooperatives/ unions are eligible business vehicles for foreign investors.
 
Besides, such enabled legal entities must strictly follow conditions on capital contribution to the exploration project (share capital must be 50% of the total investment capital minimum), personnel and equipment, instruments. A legal entity will be issued no more than 5 minerals exploration licenses with maximum valid period is 48 months each and may be extended multiple times (for all species of minerals other than oil and gas); and the total area to be explored must not exceed twice of the area of a specific mineral specified by law (e.g. not exceeding 50 square kilometers (km2), for gemstone, semi-gemstone and metallic minerals, except bauxite; and not exceeding 100 square kilometers (km2), for coal, bauxite and non-metallic minerals on land, with or without water surface, except minerals to be used as common construction materials)
 
Mineral exploration right may be transferred to another legal entity if approved by competent authority, provided that the transferee satisfies all requirements of exploration entities under the law.
 
2.2. Mining
In line with exploration, minerals mining entities must also be in compliance with requirements of share capital (30% of the total investment capital), business lines, mine design, personnel, labor safety and sanitation and equipment and instruments for mining operations.
 
In terms of environment protection, in pursuit of mining license grant, investors must have environmental impact assessment report or environment protection plan following the environment protection law.
 
A mining license is valid for 30 years at most and may be extended multiple times with the total extension period not exceeding 20 years.
 
Mining right might be transferred if licensed organization has completed construction work and put mines into operation. The transferee of the mining right must satisfy all conditions for the grant of mining licenses. However, first and foremost, the transfer must be approved by competent authority, then transferee will be granted new mining licenses.
 
Along with operating mines, mines have been exploited all along and now being in the course of closing, might remain to have a little amount of minerals in tailings. Hence, Vietnamese government still license organizations to conduct that kind of mining activity (it is also known as salvage mining or “khai thác tận thu” in Vietnamese language).
 
A license for salvage mining is valid for 5 years at most, including the extended period.
 
Mining fees shall be decided by the Government in consideration of the price, deposit, quality, kind or group of minerals, and mining conditions.
 
3. Energy
Renewable energy development in the world is going strong and Vietnam is a prime candidate to join this trend through seeking for investors, particularly foreign investors.
Vietnam now is seeking investors for renewable energy development.
 
3.1. Solar energy
Vietnamese regulations specify 2 kinds of photovoltaic power projects, including investment in grid-connected projects and investment in development of rooftop projects in accordance with the electricity development plans approved by competent authorities.
 
Other than those under regulations on construction works management, solar energy project must comply with: impact assessment of the plan for connecting solar power with the local power system; availability of devices connecting to the supervisory control and data acquisition (“SCADA”) system or moderate information to update moderation controllers on forecasts of hourly electricity generation.
 
Likewise, a grid-connected power projects is required to adhere to following requirements: (i) the owner’s equity must be 20% of the total investment capital minimum; and (ii) the land area for projects must not exceed 1.2 hectare/ 1 MWp.
                                              
As from commercial operation date investors can sell electricity, the power purchase agreements between investors and buyers (Vietnam Electricity Group (“EVN”) or its affiliates) must be in line with the model Power Purchase Agreements (“PPAs”) issued by Ministry of Industry and Trade. Parties to electricity sell contract can detail rights and obligations of the parties in PPAs, however, without prejudice to other provisions.
 
The power purchase price shall be “VND 2,086/kWh (equivalent to U.S. cent 9.35/kWh, according to the central exchange rate of VND over USD quoted by the State Bank of Vietnam on April 10, 2017, which is VND 22,316/USD)”. The price is only applicable to photovoltaic projects shall have been in commercial operation prior to June 30th, 2019.
 
3.2. Wind power
Investors desire to invest in wind power in Vietnam may follow these key steps:
 
  • The investors propose wind power project in the site in which no wind project has been approved yet;
  • The investor shall prepare dossier to propose wind power project in accordance with regulations of the law on the works construction investment and submit it to the People's Committees where the project is intended to be located;
  • The People’s Committees shall prepare dossier to suggest the additional projects in the wind power development plan (if the projects sites are not listed in wind power development plan) and send the dossier to Ministry of Industry and Trade for approval or Ministry of Industry and Trade shall submit to Prime Minister for investment policy approval in compliance with the decision-making authority;
  • Investors apply for wind power investment projects (only projects in the list of the wind power projects approved by the Minister of Industry and Trade). The People’s Committee shall issue investment registration certificate upon in-principle approval of the Ministry of Industry and Trade;
  • Signing power purchase contract and other required contracts;
  • Complete wind measurement in 12 continuous months;
  • Construction commencement;
  • Project operation.
 
Conditions on wind power projects
The land area for wind power project shall not exceed 0.5 ha/MW, if the project is located in tough terrain and must be widen for transportation and operation facilitation, the land occupancy area may be considered up to 1 ha/MW.
 
The share capital of the owner must be at least 20% of the total investment capital of the project.
 
Additionally, the project must satisfy the requirements of equipment and productivity, works safety, and environment protection.
 
Power purchase contract:
The use of power purchase contract template issued by MOIT is mandatory, parties can add other contents for the sake of clarity without affecting principal provisions of the template.
 
Power purchase price:
The purchase price, with the onshore wind power projects, at the delivery point is VND 1,928 per kWh, excluding VAT and equivalent to 8.5 US cents/kWh. On the other hand, the purchase price of offshore wind power projects, at the delivery point, is VND 2,223 per kWh, exclusive of VAT and equivalent to 9.8 US cents/kWh
 
3.3. Biomass energy
Biomass power is relatively young in Vietnam but it is positively potential. Vietnamese laws set out 2 types of biomass power projects which are off-grid and on-grid projects.
Investors are solely entitled to invest in biomass projects in accordance with biomass energy use and development planning and power development plan.
Biomass power investment project shall comply with regulation of law on management of works construction investment with the following additional main contents:
 
  • Assessment of effect of connection plan of biomass power project on the area power system;
  • Plan and scheme of cost and techniques for dismantlement and handling of equipment of the biomass power plant after the completion of project.
 
Power purchase contract
The use of power purchase contract template issued by MOIT is mandatory, parties can add other contents for the sake of clarity without affecting principal provisions of the template.
 
Feed in tariff
The feed-in-tariff (FIT) is now 5.8 US cents/kWh equivalent to 1,220 Vietnamese dong/kWh applicable to heat and electricity cogeneration projects. For power projects using biomass energy except from heat and electricity cogeneration projects: FIT is calculated and recorded in the price list of avoidable expenses which is applied to biomass power projects ratified by MOIT year by year.
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