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Oil output slump to end, easing budget deficit: JPMorgan
Vietnam’s four-year slump in oil production will reverse next year, easing a “chronic” budget deficit, JPMorgan Chase & Co. said in a report.
Output from Southeast Asia’s third-biggest crude oil producer will rise 26 percent to 368,000 barrels a day next year, the bank said in a research note dated August 15.
The government’s oil revenue may increase by US$1.4 billion by the end of 2009, New York-based JPMorgan said.
Crude production has slipped annually since 2005, with a 3 percent drop expected this year, according to a paper by Olivia Pham and Matt Hildebrandt.
The Ministry of Industry and Trade reported this month a 6 percent fall in output through July.
“Benefits to the overall trade deficit are likely to be modest, but the fiscal impact could be more material,” Pham and Hildebrandt, both based in Singapore, wrote.
“Along with lower subsidy costs, greater oil revenues could reduce the fiscal deficit significantly.” JPMorgan didn’t give estimated figures for the budget shortfall.
The trade deficit more than doubled through July.
While crude oil shipments fell 12 percent by volume, a 19 percent increase in prices this yearled to a 52 percent gain in value to $6.8 billion, making it Vietnam’s biggest export earner.
As many as five new oil fields are due to start output by next year, state-owned Vietnam Oil & Gas Group (PetroVietnam) said last month.
Cutting spending
The International Monetary Fund called in June for Vietnam to spend less than planned in order to address “an expansionary fiscal policy” that has contributed to an overheating economy.
The country was expected to post a deficit of about 8 percent of gross domestic product last year, double the shortfall in 2006, according to IMF estimates released last year.
Benchmark crude oil prices in New York have dropped 21 percent to around $114 a barrel since reaching a record $147.27 on July 11.
Oil has averaged $115 so far this year compared with $72 in 2007.
JPMorgan’s estimates for the increase in Vietnam’s government revenue are based on an average of $100 a barrel.
“More substantial improvement is possible if oil prices reverse their recent decline, or if realized production surpasses target estimates,” JPMorgan said.
“On the downside, though, production delays pose a risk to our estimates.”
Vietnamese oil production has been hurt primarily by the aging of Bach Ho, a more than two-decade-old field operated by Vietsovpetro, a joint venture between PetroVietnam and Russia’s OAO Zarubezhneft.
New oil fields
Production from Bach Ho, which accounted for 47 percent of overall output during the first seven months of the year, declined 13 percent in that period, according to Vietsovpetro.
Soco International last month began production from the Ca Ngu Vang field off southern Vietnam, which the U.K.-based company said should pump between 10,000 and 20,000 barrels of oil a day and be in production for the next 20 years.
Soco is also exploring another offshore area, which it has said contains “a very large oil field.”
Other fields due to start operation this year include Su Tu Vang, in which ConocoPhillips has the biggest foreign stake; Phuong Dong, which has Nippon Oil Corp. as the largest foreign investor; and Song Doc, in which Canada’s Talisman Energy Inc. and Malaysia’s Petroliam Nasional Bhd have shares.
Thanhnien
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