Petroleum Law No. 18-CTN

LAW

PETROLEUM AND NATURAL GAS

______

To protect, exploit, and utilize petroleum and natural gas resources effectively for national economic development and to expand cooperation with foreign countries;

Pursuant to Articles 17, 29, and 84 of the Constitution of the Socialist Republic of Vietnam in 1992;

This Law regulates activities related to exploration, development, and exploitation of petroleum and natural gas within the territory, exclusive economic zone, and continental shelf of the Socialist Republic of Vietnam.

PART I

GENERAL PROVISIONS

Article 1

All petroleum and natural gas resources located beneath the land, islands, internal waters, territorial sea, exclusive economic zone, and continental shelf of the Socialist Republic of Vietnam belong to the entire people and are uniformly managed by the State of Vietnam.

Article 2

The State of Vietnam encourages organizations and individuals from both Vietnam and abroad to invest capital and technology to conduct petroleum activities based on respecting Vietnam's independence, sovereignty, territorial integrity, and national security, and complying with Vietnamese laws.

The State of Vietnam protects ownership rights over invested capital, assets, and other legitimate benefits of organizations and individuals from Vietnam and abroad who conduct petroleum activities in Vietnam.

Article 3

In this Law, the following terms shall be understood as follows:

1. "Petroleum and natural gas" refers to crude oil, natural gas, and hydrocarbons in gaseous, liquid, solid, or semi-solid states in their natural condition, including sulfur and similar substances accompanying hydrocarbons, but excluding coal, shale, bitumen, or other minerals that can be extracted for oil.

2. "Crude oil" is liquid hydrocarbons in their natural state, asphalt, ozokerite, and liquid hydrocarbons obtained from natural gas through condensation or extraction methods.

3. "Natural gas" is all gaseous hydrocarbons extracted from wells, including wet gas, dry gas, wellhead gas, and residual gas after extracting liquid hydrocarbons from wet gas.

4. "Petroleum and natural gas activities" include exploration, development, and exploitation of petroleum and natural gas, as well as activities directly serving these operations.

5. "Petroleum and natural gas contract" is a document signed between PetroVietnam Corporation and organizations or individuals to conduct petroleum activities.

6. "Petroleum and natural gas services" are activities related to exploration, development, and exploitation of petroleum and natural gas conducted by subcontractors.

7. "Block" is an area defined by geographic coordinates for the purpose of exploring and exploiting petroleum and natural gas.

8. "Contractor" is an organization or individual from Vietnam or abroad permitted to conduct petroleum activities based on petroleum contracts.

9. "Subcontractor" is an organization or individual from Vietnam or abroad that enters into a contract with the Contractor or Joint Venture Oil Enterprise to perform petroleum services.

10. "Joint Venture Oil Enterprise" is a joint venture established based on a petroleum contract or an agreement signed between the Government of Vietnam and the Government of a foreign country.

PART II

OIL AND GAS ACTIVITIES

Article 4

Organizations and individuals conducting petroleum activities must use advanced techniques and technologies, comply with Vietnamese laws regarding resource protection, environmental protection, and safety for people and property.

Article 5

Organizations and individuals conducting petroleum activities must have an environmental protection plan, implement all measures to prevent pollution, eliminate immediate causes of pollution, and take responsibility for remedying the consequences of environmental pollution incidents.

Article 6

Organizations and individuals conducting petroleum activities must establish safe zones for facilities serving petroleum activities according to regulations set by the Government of Vietnam.

, Clause 1, Clause 2 Article 7a of this Regulation.

Organizations and individuals conducting petroleum activities must purchase insurance for equipment and facilities serving petroleum activities, environmental insurance, and other insurances as stipulated by Vietnamese laws, consistent with international petroleum industry practices.

Article 8

The exploration area for a petroleum contract is determined based on blocks designated by the Government of Vietnam.

Article 9

Petroleum activities may not be conducted in areas declared off-limits or temporarily restricted by the Vietnamese State due to national defense, national security, or public interest reasons.

In cases where petroleum activities have been permitted but subsequently banned or temporarily restricted, the Government of Vietnam will appropriately address losses incurred by organizations and individuals due to such bans or restrictions.

Article 10

The Government of Vietnam permits organizations and individuals to conduct scientific research, exploration, and exploitation of mineral resources other than petroleum within the contract area, subject to Vietnamese laws. Such activities must not hinder or cause damage to petroleum activities.

Article 11

All samples, data, and information obtained during petroleum activities belong to the State of Vietnam. Management and utilization of these samples, data, and information must comply with Vietnamese laws.

Article 12

Organizations and individuals conducting petroleum activities are permitted to install, operate, and maintain fixed structures and equipment serving petroleum activities; construct and use transportation routes, pipelines, storage facilities serving the transport and storage of petroleum and natural gas according to Vietnamese laws.

These fixed structures and equipment belong to the State of Vietnam from the date agreed upon by the parties signing the petroleum contract.

Article 13

After completing petroleum activities, organizations and individuals must release the used area, dismantle fixed structures and equipment as required by competent state management authorities.

Article 14

PetroVietnam Corporation (internationally known as "PETROVIETNAM") is a state-owned enterprise established by the Government of Vietnam to conduct petroleum activities and sign petroleum contracts with organizations and individuals conducting petroleum activities as stipulated by this Law.

CHAPTER III

OIL AND GAS CONTRACTS

Article 15

A petroleum contract shall be concluded in the form of a product-sharing contract, joint venture contract, or other forms.

The petroleum contract must comply with the Model Contract issued by the Government of Vietnam, which includes the following main contents:

1. Legal status of organizations and individuals participating in the signing of the contract;

2. Object of the contract;

3. Limitation of area and progress in returning the contract area;

4. Duration of the contract;

5. Conditions for terminating the contract before the expiration date or extending the duration of the contract;

6. Commitments regarding work progress and financial investment;

7. Rights and obligations of the parties to the contract;

8. Recovery of investment capital, determination of profits, and profit distribution; the host country's rights to fixed assets after recovery of investment and upon termination of the contract;

9. Conditions for transferring rights and obligations of the parties to the contract; rights of PetroVietnam Corporation to participate in investment;

10. Commitment to training and preference for Vietnamese labor and services;

11. Responsibility for environmental protection and ensuring safety during the conduct of petroleum activities;

12. Dispute resolution procedures arising from the contract.

Besides the provisions in the model contract, the parties to the contract may agree on additional terms that do not conflict with this Law and Vietnamese laws.

Article 16

Organizations and individuals wishing to conclude oil and gas contracts must do so through bidding or other forms prescribed by the Government of Vietnam. Such organizations and individuals must provide clear explanations regarding their financial capacity, technical expertise, and professional experience in the field of oil and gas activities.

Article 17

The duration of a petroleum contract shall not exceed twenty-five years (25 years), including the exploration phase not exceeding five years (5 years).

The term of oil and gas contracts for deep-sea and offshore areas, and the term of exploration and production contracts for natural gas shall not exceed thirty years (30 years), including a maximum of seven years (7 years) for the exploration phase.

The term of oil and gas contracts may be extended, but not more than five years (5 years), and the term of the exploration phase may also be extended, but not more than one year (1 year), upon the proposal of the Contractor and with the approval of the Government of Vietnam.

Oil and gas contracts may terminate before the expiration date provided that the Contractor fulfills all committed obligations and obtains agreement from the contracting parties.

Article 18

The exploration area for a petroleum contract shall not exceed two blocks (2 blocks).

In special cases, the Government of Vietnam may permit the exploration area for an oil and gas contract to cover up to two blocks (2 blocks), but not exceeding four blocks (4 blocks).

Article 19

The Contractor must return the exploration area in accordance with the regulations of the Government of Vietnam.

Article 20

The Contractor and Vietnam National Oil Corporation must agree in the oil and gas contract on the progress of work and the minimum financial commitment during the exploration phase.

Article 21

Upon discovery of oil and gas, the Contractor and Vietnam National Oil Corporation must report and provide all necessary information about the discovery to the competent state management agency.

If the discovered oil and gas is deemed commercially viable, the Contractor must immediately conduct an appraisal program, prepare a reserve report, draft a field development plan and production plan, and submit them for approval by the competent state management agency.

Article 22

The language of the oil and gas contract signed with foreign organizations and individuals and accompanying documents must be Vietnamese and a commonly used foreign language agreed upon by Vietnam National Oil Corporation and the foreign organization or individual. Both the Vietnamese version and the foreign language version have equal validity.

Article 23

The oil and gas contract becomes effective after being approved by the Government of Vietnam.

"d) Within no more than one working day from the date of receiving the dossier submitted for administrative procedures by the specialized agency assigned by the Provincial People's Committee, the Chairman of the Provincial People's Committee shall issue a notification of the result of the inspection of plant-based food exports or a certificate at the request of the importing country."

The transfer of the entire or part of an oil and gas contract by the participating parties only takes effect after being approved by the Government of Vietnam.

Vietnam National Oil Corporation has the right of first refusal to purchase all or part of the transferred contract.

Article 25

Vietnam National Oil Corporation has the right to participate in capital investment in oil and gas contracts. The ratio, timing of participation, reimbursement of costs to the Contractor, and agreements on operation are stipulated in the oil and gas contract in accordance with international oil industry practices.

Article 26

The Contractor has the right to enter into service contracts for oil and gas, but must prioritize entering into such contracts with Vietnamese organizations and individuals.

Vietnam will undertake aviation services itself or enter into joint venture contracts with foreign countries to implement aviation services for oil and gas operations.

Article 27

Disputes arising from oil and gas contracts shall first be resolved through negotiation and mediation.

In cases where disputes cannot be resolved amicably, if the disputing parties are Vietnamese organizations and individuals, the dispute will be resolved according to Vietnamese law; if the disputing party is a foreign organization or individual, the dispute will be resolved according to the provisions of the Law on Foreign Investment in Vietnam.

PART IV

RIGHTS AND OBLIGATIONS OF THE CONTRACTOR

Article 28

The Contractor has the following rights:

1. To enjoy incentives and guarantees as prescribed by Vietnamese law;

2. To use samples, data, and information obtained to carry out oil and gas activities;

3. To recruit workers to perform tasks under the oil and gas contract, prioritizing the recruitment of Vietnamese workers;

4. To subcontract in accordance with this Law and in line with international oil industry practices;

5. To be exempted from import duties on equipment and materials necessary for oil and gas activities and from re-export duties when imported equipment is not permanently installed or materials are not fully utilized, as prescribed by Vietnamese law;

6. To own its share of oil and gas after fulfilling all financial obligations to the Vietnamese State;

7. To export its share of oil and gas in accordance with the terms of the oil and gas contract;

8. To recover invested capital in accordance with the terms of the oil and gas contract;

9. Foreign organizations and individuals acting as Contractors may repatriate investment capital and profits earned during oil and gas operations in accordance with the provisions of the Law on Foreign Investment in Vietnam.

Article 29

Subcontractors enjoy the rights specified in Points 1, 3, and 5 of Article 28 of this Law.

Foreign organizations and individuals acting as Subcontractors also enjoy the right specified in Point 9 of Article 28 of this Law.

Article 30.

The Contractor has the following obligations:

1. To comply with Vietnamese law;

2. To fulfill commitments recorded in the oil and gas contract;

3. To pay taxes and fees as prescribed by Vietnamese law;

4. To transfer technology; train, employ Vietnamese staff and ensure workers' rights;

5. Implement measures to protect the environment;

6. To report oil and gas activities to competent state management agencies and PetroVietnam Corporation;

7. Provide documents to inspection teams;

8. To dismantle facilities, equipment, and means after completing oil and gas activities upon request of competent state management agencies;

9. Sell a portion of the oil and gas under their ownership in the Vietnamese market at the request of the Government of Vietnam.

Article 31

Subcontractors have the obligations specified in Points 1, 2, 3, 4, 5, and 7 of Article 30 of this Law.

CHAPTER V

TAXES AND FEES

Article 32

Organizations and individuals exploiting oil and gas must pay resource tax.

Resource tax is calculated based on actual production volume during the tax payment period for each oil and gas contract.

The rate of resource tax on crude oil ranges from six percent (6%) to twenty-five percent (25%), with higher rates possible in exceptional circumstances.

The rate of resource tax on natural gas is set between zero percent (0%) and ten percent (10%).

The Government of Vietnam sets specific tax rates within the aforementioned tax range based on geological, economic, and technical conditions of the field and the level of crude oil or natural gas production.

Article 33

Organizations and individuals conducting exploration and production of oil and gas must pay income tax at a rate of fifty percent (50%) on taxable income during the tax period.

In special cases, organizations and individuals conducting exploration and production of oil and gas may be exempted or granted tax reductions. Exemptions or reductions in income tax are determined by the Government of Vietnam.

Article 34

Vietnamese organizations and individuals acting as Subcontractors conducting activities in Vietnam must pay income tax in accordance with the Income Tax Law.

Foreign organizations and individuals registered to operate in Vietnam acting as Subcontractors must pay income tax in accordance with the Law on Foreign Investment in Vietnam.

Foreign organizations and individuals not registered to operate in Vietnam acting as Subcontractors must pay taxes in accordance with Vietnamese law.

Article 35

Organizations and individuals conducting petroleum activities must pay export tax, import tax, land use rental fees or real estate tax, other taxes, and fees as prescribed by Vietnamese law.

Foreign organizations and individuals conducting petroleum activities must pay profit repatriation tax according to the Law on Foreign Investment in Vietnam.

Article 36

Foreign individuals and Vietnamese individuals working for Contractors, Joint Ventures, or Subcontractors must pay income tax according to Vietnamese law.

Article 37

In accordance with the agreement in the petroleum contract, resource taxes and other taxes that the Contractor or Joint Venture must pay may be included in the share of products allocated to PetroVietnam, provided that PetroVietnam commits to paying those resource taxes and other taxes on behalf of the Contractor or Joint Venture.

Chapter VI

STATE MANAGEMENT OF OIL AND GAS ACTIVITIES

Article 38

The management of state affairs regarding petroleum includes:

1. Deciding on strategies, plans, policies, and development programs for the petroleum industry;

2. Issuing legal regulations governing petroleum activities;

3. Inspecting, auditing, and supervising petroleum activities;

4. Determining and adjusting the allocation of exploration and production blocks;

5. Deciding on cooperation principles and forms with foreign entities;

6. Approving petroleum contracts;

7. Deciding on policies to encourage or restrict petroleum exports to ensure national interests while considering the interests of Contractors;

8. Directing, guiding, inspecting, and supervising relevant activities of industries and localities related to petroleum activities;

9. Resolving issues related to the conduct of petroleum activities and handling violations of this Law.

Article 39

The Government of Vietnam uniformly manages state affairs concerning petroleum activities.

The State Management Agency for Petroleum is established under the Law on the Organization of the Government to perform its functions in managing state affairs regarding petroleum activities.

Ministries and other state agencies perform their functions in managing state affairs concerning petroleum activities within their respective duties and authorities.

Chapter VII

INSPECTION OF PETROLEUM ACTIVITIES

Article 40

Auditing petroleum activities is specialized auditing aimed at ensuring compliance with the provisions of this Law, regulations, procedures, technical norms, protection of petroleum resources, environmental protection, technical safety, and fulfillment of obligations to the Socialist Republic of Vietnam by organizations and individuals conducting petroleum activities.

Article 41

The State Management Agency for Petroleum organizes the implementation of the function of auditing petroleum activities.

When conducting audits of petroleum activities, the audit team has the right to:

1. Request organizations and individuals involved to provide documents and answer questions necessary for the audit;

2. Conduct technical inspections at the site;

3. Temporarily suspend or recommend competent state agencies to suspend petroleum activities that pose a risk of causing serious accidents or losses to people, property, petroleum resources, or environmental pollution;

4. Handle violations within their authority or recommend competent state agencies to handle violations.

Article 42 |||

Organizations and individuals conducting petroleum activities must facilitate the audit team's performance of their tasks and strictly comply with all decisions made by the audit team.

Organizations and individuals have the right to appeal against the audit team's decisions according to Vietnamese law.

Chapter VIII

HANDLING VIOLATIONS

1. The "Labor Medal" second class shall be awarded or posthumously awarded to individuals meeting one of the following criteria:

Organizations and individuals violating the provisions of this Law shall be subject to warnings, fines, confiscation of equipment, or other administrative penalties depending on the severity of the violation.

Individuals committing acts constituting criminal offenses shall be held criminally responsible according to Vietnamese law.

Article 44 |||

Organizations and individuals conducting petroleum activities causing damage to petroleum resources, other natural resources, the environment, or state or organizational assets must compensate for such damages according to Vietnamese law.

Article 45 |||

Organizations and individuals obstructing petroleum activities illegally shall be dealt with according to Vietnamese law.

Article 46 |||

Organizations and individuals have the right to appeal against decisions on handling violations according to Vietnamese law.

CHAPTER IX

IMPLEMENTING PROVISIONS

Article 47 |||

This Law and other provisions of Vietnamese law also apply:

1. On facilities, vessels, and equipment serving petroleum activities in the Exclusive Economic Zone and Continental Shelf of the Socialist Republic of Vietnam;

2. On facilities, vessels, and equipment of Vietnamese organizations and individuals serving petroleum activities based on cooperation with foreign entities in areas not under the jurisdiction of the Socialist Republic of Vietnam.

Article 48

The Government of Vietnam ensures economic rights of parties that have signed petroleum agreements and contracts and been approved by the Government of Vietnam before this Law takes effect.

Article 49

Based on the provisions of this Law, the Government of Vietnam signs agreements with foreign governments for cooperation in conducting petroleum activities in Vietnam.

Article 50

All previous provisions that are contrary to this Law are hereby abolished.

The Government of Vietnam shall issue detailed regulations to implement this Law.

Article 51

This Law comes into effect from September 1, 1993.

This Law was passed by the National Assembly of the Socialist Republic of Vietnam, Ninth Session, Third Meeting, on July 6, 1993.