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What else besides incentives are needed to ‘wake up’ investment in oil and gas industry?

Along with investment incentives, the Government proposed to the National Assembly many new policies in the Draft Law on Oil and Gas (revised) to "wake up" investment in the oil and gas industry.

Before being submitted to the National Assembly at the third session (May 2022), the draft amended Law on Oil and Gas will be on the agenda of the National Assembly Standing Committee’s 10th session on April 14-23.

The amendment of this specialized law comes amid the context that the contribution to the state budget from the National Oil and Gas Group of Vietnam (PVN) – the key corporation of the oil and gas industry - fell from an average of 20-25% in the 2006-2015 period to 10% after 2015.

Many provisions of the Law are no longer suitable with the current situation and international oil and gas industry practices, making it difficult to call for investment in this field.

In this new context, according to the Chairman of the National Assembly's Economic Committee (the body in charge of reviewing the draft amended law) Vu Hong Thanh and experts, a new perspective is required.

The new draft is not only a proposal of a special incentive to "wake up" investment in the industry that once contributed up to 25% of the country’s GDP, but more importantly, to ensure both the specificity of the oil and gas industry and the consistency of the legal system in harmony with international practices.

The need is to establish a separate implementation process for oil and gas that is clear and specific enough to be implemented immediately.

To do so, it is necessary to handle the relationship between the Law on Oil and Gas and the provisions in the Investment Law, the Bidding Law and many other related laws.

Deputy Chairman of the National Assembly's Law Committee Ms. Tran Hong Nguyen said that in the Draft Oil and Gas Law (amended), the specific authority, order, procedures and conditions for basic inspection of oil and gas are needed, and oil and gas activities must comply with the Oil and Gas Law. These activities are still carried out under the Investment Law.

Summarizing the opinions of the business community, the Vietnam Chamber of Commerce and Industry (VCCI) pointed out qualitative provisions in the draft law, such as the words "unfavorable", "very limited" business efficiency, "normal" technical measures... VCCI also suggested that there should be a separate provision regulating oil and gas incidents, because this is a very important.

Delegates from the National Assembly’s Judiciary and Economic Committees and the Ethnic Council agreed that it is necessary to add regulations related to oil and gas contracts, and basic investigation on oil and gas, especially PVN's legal position.

Supplementing and perfecting the provisions related to oil and gas contracts is the policy ranked first in the impact assessment report of the Ministry of Industry and Trade. The proposed option is to stipulate the contract term in a flexible way for the contractor, unifying the terms of the oil and gas contract for oil and gas exploitation.

Specifically, it is regulated that the oil and gas contract term will be 30 years for both oil and gas, and oil and gas blocks are entitled to investment incentives and special investment incentives. The term of the oil and gas contract will not exceed 35 years (an increase of 5 years compared to the current Law). The term for oil and gas exploration period can be extended, but no more than 5 years (3 years more), to be similar to other countries in the region, in order to increase attractiveness for investors.

However, the concerns of experts are about regulations on oil and gas contracts, which contain the content: "The Government issues the model contract of the contract for sharing oil and gas products and model contract of other form of contracts when necessary.”

The head of the Legal Department of VCCI, Dau Anh Tuan, said that the model contract (specified in the decree) is currently very narrow. Allowing adjustment of contracts, according to Mr. Tuan, gives more room for negotiation with investors.

Standing member of the National Assembly’s Economic Committee Mr. Phan Duc Hieu said: "The contract is an agreement of the parties. If the contractor offers a standard contract, should we keep forcing them to follow our contract?"

Another issue that both Mr. Tuan and Mr. Hieu mentioned is the regulation that the language used in the oil and gas contract and the documents attached to the contract must be Vietnamese. If at least one party to the oil and gas contract is a foreign organization or individual, in addition to the Vietnamese version, the oil and gas contract and the documents attached to the contract are to be signed in a common foreign language approved by the parties. The Vietnamese and foreign language versions have the same legal validity.

Mr. Tuan said that when the two translations have different content, it can lead to controversy and risk later, so it is necessary to choose one language if there is a difference. The draft law should add a provision that, when there is a difference between the Vietnamese version and the foreign language, the Vietnamese version has the higher legal validity.

However, Mr. Hieu said that the parties should be allowed to choose a language for the contract, and that is the original contract. Vietnamese is very important, but having approached international practice, the parties should choose the language for the original contract.

Some experts say that it is necessary to pay special attention to the distinctive features of oil and gas contracts because oil and gas is a national resource, exploited in the East Sea, so it is related to international law.

If it meets the requirements, the amended Oil and Gas Law will be passed at the fourth session of the National Assembly (October 2022).

Hanh Nguyen

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