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The Ministry of Industry and Trade (MoIT) has proposed regulations in a draft amended Oil and Gas Law covering investment incentives for oil and gas activities, including eligibility criteria for blocks and fields and the tax and cost-recovery framework for different incentive categories.
Under the draft, eligible beneficiaries include oil and gas blocks and fields in specific circumstances, such as deep-water and offshore areas with difficult geography and complex geology, blocks with no bidders after being tendered under the contract’s economic and technical conditions, and blocks formed from deduction areas or returned blocks under existing contracts. The draft also includes marginal fields and certain cases at contract expiry where exploration remains viable but minimum investment efficiency is not met, as well as new blocks not yet explored or discovered in the sedimentary basin and other cases decided by the Prime Minister.
The draft further specifies criteria for blocks and fields eligible for “special investment incentives,” including deep-water blocks far from shore with special geographic difficulty and complex geology, blocks tendered under incentive conditions with no bidders, blocks formed from deduction areas, blocks returned before contract expiry, and blocks formed from combined deduction and returned areas. It also covers marginal fields under conventional blocks or incentive-bearing blocks with signed oil and gas contracts, cases at contract termination where investment returns do not meet minimum thresholds, blocks with unconventional hydrocarbons, and other cases decided by the Prime Minister.
The Prime Minister will issue a list of blocks and fields eligible for investment incentives and special investment incentives.
For blocks and fields under standard investment incentives, the draft sets a corporate income tax rate of 32%, a crude oil export tax of 10%, and a maximum cost recovery of 70% of annual oil and gas production.
For blocks under special investment incentives, the corporate income tax rate is 25%, the crude oil export tax is 5%, and the maximum cost recovery is 80% of annual production.
Contracts for blocks receiving special investment incentives are stated to adopt the same tax and cost-recovery framework.
The draft states that if a contractor adopts technologies to raise the oil recovery factor, a field development plan must be prepared and approved by the Vietnam National Oil and Gas Group (PVN) based on the MoIT’s assessment.
Additional incentives for EOR include:
Marginal fields that do not achieve minimum investment efficiency under standard or special incentives would be eligible for the cost-recovery framework described in the draft. After fulfilling resource tax obligations, the contractor can allocate all recoverable oil and gas to cost recovery, and once those costs are recouped and income tax obligations are met, the contractor may receive the entire oil and gas profit share.
The draft also provides that for contracts applying enhanced cost recovery for marginal fields up to an additional 10% relative to standard or special incentives, cost recovery is applied to the marginal field; once costs are fully recovered, the applicable cost-recovery rate reverts to the contract terms.
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