Via Energy Daily, a report on a recent agreement between Russia and Vietnam on further cooperation on geological exploration and hydrocarbon production by their Vietsovpetro joint venture.  As the article notes, the agreement prolongs the activity of the Vietsovpetro joint venture between Russia’s Zarubezhneft and Petrovietnam after 2010, and some analysts speculate that – beginning on Jan. 1, 2011 – Vietsovpetro will be reorganized into a company in which Zarubezhneft and Petrovietnam will hold, respectively, 49 percent and 51 percent stakes in its charter capital

“…Western geological exploration of South Vietnam’s offshore South Continental Shelf began in the late 1960s. Mobil and Shell subsidiary Pecten drilled offshore in the Nam Con Son and Cuu Long basins and found the largest oil fields in the South China Sea. The prize that they uncovered was significant, with Nam Con Son estimated to contain 20 percent and Cuu Long 30 percent of Vietnam’s total hydrocarbon resources. But the course of the war meant that changing military and political realities would shortly overwhelm both the South Vietnamese government and the dreams of the Western energy concerns.

…Like the United States, the Soviet Union also had been interested in (North) Vietnam’s oil potential, beginning in 1960 with surveys of the Hanoi Trough. Nine years later the Vietnam General Department of Geology drilled its first well there, followed in 1975 by a series of deep wells in Tien Hai C field in Thai Binh province, which discovered deposits of natural gas.

…Removed from viewing Soviet energy assistance through the prism of Vietnamese nationalism, the reality was that in the 1970s the Soviet Union was singularly unequipped to assist Vietnam in developing its offshore energy assets, as deepwater drilling was a Western specialty and Western governments heavily embargoed exports of the technology to the Soviet Union and its allies. During this period the Soviet Union was heavily investing in developing its onshore western Siberian fields, and less than 2 percent of the Soviet Union’s oil output came from offshore sites, virtually all in the shallow Caspian waters off Azerbaijan.

Fast-forward 30 years. Vietnam’s oil and gas industry has produced almost 1 billion barrels of crude oil and 300 billion cubic feet of natural gas and attracted more than $5 billion in foreign capital for exploration and production. In contrast, Kazakhstan, which in 1991 essentially had no significant hydrocarbon infrastructure, has absorbed more than $40 billion in investment.

The reasons for the relative paucity of foreign investment are numerous — besides Vietnamese nationalism and an unwillingness to cede majority control to foreign investors, other factors include the dead hand of the communist bureaucracy, corruption and unresolved territorial conflicts over Vietnam’s offshore waters with Cambodia, China, Taiwan, Malaysia, the Philippines and Brunei.

While such considerations have induced caution in Western companies, the Kremlin sees opportunity. The agreement signed Oct. 27 by Russian President Dmitry Medvedev and Vietnamese President Nguyen Minh Triet encompasses prolonging the activity of the Vietsovpetro joint venture between Russia’s Zarubezhneft and Petrovietnam after 2010. Analysts speculate that beginning on Jan. 1, 2011, Vietsovpetro will be reorganized into a company in which Zarubezhneft and Petrovietnam will hold, respectively, 49 percent and 51 percent stakes in its charter capital.

Elaborating on the benefits of energy cooperation with Vietnam, Medvedev told assembled journalists that Vietsovpetro “has yielded 175 million tons of crude and over $7 billion in profits for the Russian budget. That is a good result, and we hope to continue cooperation with our Vietnamese colleagues,” before adding that bilateral trade between Russia and Vietnam eventually may reach $10 billion….”