Government urged to incentivize investment in oil production

The number of contracts for exploration and drilling fell from 35 in 2009-2014 to just three in the next five years.

No new contract has been signed in the last two years.

Low reserves and diminishing outputs have driven investors out, and so the country needs better policies and incentives to attract them back, the experts said.

The output has declined by 40 percent since 2016, according to data from state-owned Petrovietnam.

In proposed amendments to the Law on Petroleum, authorities are seeking to lower the income tax and royalty 7 and 10 percentage points to 25 percent and 20 percent, respectively.

But economist Nguyen Minh Phong wanted the income tax to be cut to 20 percent, equal to that of Thailand and lower than Malaysia and China's rates.

He also suggested a 10- percent export tax of crude oil to increase domestic supply. Last year Vietnam imported 9.9 million tons of crude and exported 3.1 million tons.

Vietnam is a big oil exporter but an even bigger importer, and with surging global prices the country is jeopardizing its energy security, he warned.

Pham Van Son, director of the Vietnam Environmental Incident Response Center, pointed out that the amendments do not address the environmental risks related to drilling.

"Companies’ commitment to environmental protection should be appraised and monitored."

Doan Van Thuan of the Vietnam Petroleum Institute said the draft only "vaguely mentions" technological advances in the oil industry like the CO2 storage technology used in the U.S. and Indonesia.

"Investors should be allowed to store CO2 in depleted oil fields."

Le Quang Dien, vice dean of the oil and gas faculty at the Hanoi University of Mining and Geology, said CO2 storage is a relatively new technology and Vietnam would need five to 10 years to develop it, but the bill needs to address it.