Law Amending and Supplementing Certain Provisions of the Petroleum Law No. 19/2000/QH10

LAW

Amending and Supplementing Certain Provisions of the Petroleum Law

Based on the Constitution of the Socialist Republic of Vietnam in 1992;

This Law amends and supplements certain provisions of the Petroleum Law adopted by the National Assembly of the Socialist Republic of Vietnam on July 6, 1993.

Article 1. Amending and supplementing certain provisions of the Petroleum Law as follows:

1. Supplementing Clause 2a as follows:

"Clause 2a

Petroleum activities must comply with the provisions of the Petroleum Law and other relevant provisions of Vietnamese law.

In case there is a difference between the provisions of the Petroleum Law and other provisions of Vietnamese law regarding the same specific issue related to petroleum activities, the provisions of the Petroleum Law shall be applied.

In case the Petroleum Law and other provisions of Vietnamese law do not provide for a specific issue related to petroleum activities, the parties to the petroleum contract may agree to apply international law, international custom, or foreign law concerning petroleum, provided that such international law, international custom, or foreign law does not contravene the fundamental principles of Vietnamese law."

2. Supplementing Point 11 and Point 12 of Clause 3 as follows:

"11. The operator is an organization or individual representing the parties participating in the petroleum contract, managing activities within the scope of their authority.

12. An encouraged investment petroleum project is a project conducting petroleum activities in deep waters, offshore areas, and regions with particularly difficult geographical and geological conditions according to the list of blocks decided by the Prime Minister of the Government."

3. Clause 15 is amended and supplemented as follows:

"Clause 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 profit, and distribution of profit; rights of the host country over fixed assets after recovery of investment and after 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. Method of resolving disputes arising from the contract and applicable law.

In addition to the provisions in the Model Contract, the parties to the contract may agree on other terms but must not contravene the provisions of this Law and other relevant provisions of Vietnamese law.

The parties to the petroleum contract may agree to appoint one party to the petroleum contract as the Operator, or to hire an Operator, or to establish a Joint Operating Company in accordance with the regulations of the Government of Vietnam.

In cases where approved by the Prime Minister, the parties to the petroleum contract may agree not to apply the Model Contract, but the contract signed must still include the main contents as stipulated in this clause."

4. Article 16 shall be amended and supplemented as follows:

"Clause 16

Organizations and individuals wishing to conclude a petroleum contract must go through bidding in accordance with the separate regulations on bidding for exploration and production projects issued by the Government of Vietnam.

In special cases, the Prime Minister may designate a tender to select partners to sign the petroleum contract."

5. Article 17 shall be amended and supplemented as follows:

"Clause 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).

For encouraged investment petroleum projects and exploration and production of natural gas projects, the duration of the petroleum contract shall not exceed thirty years (30 years), including the exploration phase not exceeding seven years (7 years).

The duration of the petroleum contract may be extended, but not more than five years (5 years), and the duration of the exploration phase may be extended, but not more than two years (2 years).

If commercial gas is discovered but there is no market for consumption and no suitable pipeline and processing facilities, the Contractor may retain the discovered gas area. The retention period for the discovered gas area shall not exceed five years (5 years) and may be extended by an additional two years (2 years) in special circumstances. During the waiting period for market consumption and suitable pipeline and processing facilities, the Contractor must carry out the commitments made in the petroleum contract.

In cases of force majeure or other special circumstances, the parties to the petroleum contract may agree on methods to temporarily suspend some rights and obligations under the petroleum contract. The suspension period due to force majeure can be extended until the force majeure event ends. The suspension period in other special circumstances is determined by the Government of Vietnam, but not exceeding three years (3 years).

The extension of the exploration phase, the retention period for discovered commercially viable gas, and the suspension period for the performance of some rights and obligations under the petroleum contract due to force majeure or other special circumstances shall not be counted towards the duration of the petroleum contract.

The petroleum contract may terminate before its expiration date provided that the Contractor fulfills all committed obligations and obtains agreement from the parties to the contract."

6. Clause 18 is amended as follows:

"Article 18

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

In special cases, the Government of Vietnam may allow the exploration area for a petroleum contract to exceed two blocks (2 blocks)."

7. Clause 19 is supplemented as follows:

"Clause 19

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

The area subject to the temporary suspension agreement as provided for in Article 17 of this Law does not need to be returned during the suspension period.

8. Supplement Article 25a as follows:

"Article 25a

The parties to the oil and gas contract may agree on the level of recovery of exploration, development, and production costs up to seventy percent (70%) of the annual oil and gas production volume for encouraged investment projects and up to fifty percent (50%) for other projects until full recovery is achieved."

9. Article 27 is amended and supplemented as follows:

"Article 27

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

In cases where negotiations and mediation fail to reach a result, if the disputing parties are Vietnamese organizations or individuals, the dispute shall be resolved at arbitration or Vietnamese courts according to Vietnamese law; if one of the disputing parties is a foreign organization or individual, the dispute shall be resolved according to the method stipulated in the oil and gas contract; if the parties agree to resolve disputes at international arbitration, third-party arbitration, or arbitration chosen by mutual agreement, the dispute shall proceed according to the procedures of such arbitrations."

10. Article 28 is amended and supplemented as follows:

"Article 28

1. The Contractor has the following rights:

a) To enjoy incentives and guarantees as prescribed by Vietnamese law;

b) To use samples, data, and information obtained to conduct oil and gas activities;

c) To recruit workers to perform oil and gas contract tasks with priority given to recruiting Vietnamese workers;

d) To hire Subcontractors in accordance with this Law and consistent with international oil industry practices;

đ) To be exempted from import and export taxes as provided for in Article 34 of this Law;

e) To have ownership rights over its share of oil and gas after fulfilling financial obligations to the Vietnamese State;

g) To export its share of oil and gas according to the agreement in the oil and gas contract without needing an export permit;

h) To recover capital investments according to the agreement in the oil and gas contract.

2. Foreign organizations and individuals acting as Contractors may open accounts in Vietnam and abroad; they may transfer income from the sale of oil and gas within the recovery cost, profit, and other lawful income earned during oil and gas operations out of Vietnam.

3. Foreign organizations and individuals acting as Contractors are permitted to purchase foreign currency from commercial banks to meet current transactions and other transactions allowed under foreign exchange management laws; they are guaranteed foreign currency balance for important projects."

11. Article 29 is amended and supplemented as follows:

"Article 29

Subcontractors enjoy the rights stipulated in point a and point c Clause 1 of Article 28 and Article 34 of this Law.

Foreign organizations and individuals acting as Subcontractors may transfer their share of recovery costs and profits earned during service oil and gas operations out of Vietnam."

12. Article 30 is amended and supplemented as follows:

"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. To implement measures to protect the environment and ensure safety in oil and gas activities;

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

7. To provide necessary 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. To sell a portion of crude oil owned by them at competitive international prices in the Vietnamese market when requested by the Vietnamese Government and to sell natural gas based on agreements in development and exploitation projects."

13. Article 32 is amended and supplemented as follows:

"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 is set between four percent (4%) and twenty-five percent (25%).

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

The Vietnamese Government specifies the specific tax rate within the tax rate range as provided for in this Article depending on geographical, economic, and technical conditions of the field and the level of crude oil or natural gas production."

14. Article 33 is amended and supplemented as follows:

"Article 33

Organizations and individuals conducting exploration, and exploitation of oil and gas must pay corporate income tax at a rate of fifty percent (50%).

Organizations and individuals conducting exploration, and exploitation of oil and gas in encouraged investment projects must pay corporate income tax at a rate of thirty-two percent (32%).

Organizations and individuals conducting exploration, and exploitation of oil and gas may be exempted from corporate income tax for a maximum period of two years (2 years) and may have their corporate income tax reduced by fifty percent (50%) for a maximum period of two years (2 years) thereafter. The exemption or reduction of corporate income tax is regulated by the Vietnamese Government.

Reinvested profits are not subject to refund of corporate income tax."

15. Article 34 is amended and supplemented as follows:

"Article 34

Organizations and individuals conducting oil and gas activities must pay export and import taxes as prescribed by the Law on Export Tax and Import Tax.

Equipment, machinery, spare parts, and specialized transportation means necessary for oil and gas activities are exempted from import tax.

Materials necessary for oil and gas activities that are not produced domestically are exempted from import tax.

Temporary imported goods for re-export serving oil and gas activities are exempted from export and import taxes.

The petroleum portion under the natural resources tax of the State shall not be subject to export tax.

16. Article 35 is amended and supplemented as follows:

"Article 35

In addition to the taxes prescribed in Articles 32, 33, and 34 of this Law, organizations and individuals conducting petroleum activities must pay other taxes, land rental fees, and registration fees as provided for by Vietnamese law. In cases where changes in Vietnamese law result in damage to the interests of organizations and individuals conducting petroleum activities, the State shall take appropriate measures to address the rights and interests of such organizations and individuals in accordance with the Law on Foreign Investment in Vietnam.

Equipment, machinery, spare parts, specialized transportation means, and necessary materials imported for exploration, development activities that are not yet produced domestically shall not be subject to value-added tax.

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

17. Article 49 is amended and supplemented as follows:

"Article 49

In cases where international treaties to which the Socialist Republic of Vietnam is a party provide differently from the provisions of this Law, the provisions of such international treaties shall apply.

Article 2. This Law shall take effect from July 1, 2000.

Article 3. The Government shall amend and supplement detailed implementing regulations for the Petroleum Law to be consistent with this Law.

This Law was adopted by the National Assembly of the Socialist Republic of Vietnam, the tenth session, seventh meeting, on June 9, 2000.