Doing Business : Foreign Oil Firms Rush Into Vietnam, but What About U.S. Companies? : Hanoi would be more than happy to deal with the Americans, but its officials are also sending this message: We can’t wait forever.

In one of the many examples of poetic justice that abound in Indochina, the Vietnamese national oil company set up its offices in the abandoned and mildewed offices of the U.S. Embassy here.

After all, it was U.S. oil companies that first discovered oil in the South China Sea in the closing days of the Vietnam War. And it is the U.S. government’s trade embargo that is keeping those oil firms from returning to work the discoveries.

“Vietnam would be very happy if the American companies come back quickly,” said Do Dinh Luyen, deputy general director of the state oil company, PetroVietnam. “But we can’t wait if some other companies make a good proposal for cooperation.”

The Vietnamese government adopted new policies in late 1987 to encourage Western firms to return to Vietnam, and since then a number of oil firms representing countries from Canada to India--but not the United States--have obtained licenses to explore offshore.

To bolster its carrot to the American firms, PetroVietnam is making a Vietnamese-Soviet joint venture, Vietsovpetro, give up 4 1/2 choice exploration blocks, which will soon be auctioned off. (The old American concessions were declared void when the war ended in 1975.)

Mobil, Exxon and Chevron have already made proposals to the Vietnamese government, but the Bush Administration has so far shown no inclination to relax the embargo to allow American firms to compete with British, French, Belgian and other foreign firms already exploring for oil.

“We can’t wait forever,” Luyen said.

Vietnam is impatient because the oil industry is one of the few bright spots in an economy that is blighted by the trade embargo and the recent cutoff of Soviet aid totaling around $1.5 billion a year. Among the benefits lost was free Soviet gasoline, which the Vietnamese must now purchase with scarce hard currency in Singapore.

Charles J. Johnson, a researcher in Hawaii’s East-West Center Energy Program, recently estimated that Vietnam has the potential to produce between 300,000 and 500,000 barrels of oil a day in the next 15 years. “The upper end of this optimistic estimate would place Vietnam in the same oil production league as Australia and Malaysia,” Johnson said.

In addition, Vietnam is one of the few areas of the world still open to Western oil firms, but relatively unexploited.

While 10 Western companies are currently exploring for oil and gas off the Vietnamese coast, only one firm--the joint Soviet-Vietnamese venture--is actually producing oil commercially, according to PetroVietnam.

From a start in August, 1986, Vietsovpetro has steadily increased production to 75,000 barrels a day in the Bach Ho, or White Tiger field, which was discovered by Mobil in 1975 in the sea southeast of Saigon.

While not in the same oil-producing league as Saudi Arabia or Indonesia, officials point out that Vietnam’s domestic oil needs are currently only 60,000 barrels a day, so the country is already a net exporter. (Gasoline is imported because the country has virtually no refining capacity.)

In addition to the White Tiger field, which the Vietnamese say has recoverable reserves estimated at 500 million barrels, PetroVietnam hopes to begin commercial production within two years at two other fields: Rong (Dragon), discovered by Cities Service in 1974 and with reserves estimated at 400-500 million barrels, and Dai Hung (Big Bear), with reserves the state oil company estimates at 1 billion barrels.

With the two new fields in production, Luyen said, PetroVietnam expects to be producing 150,000 barrels a day by 1995.

Western competition has become intense for participation in Big Bear, because the oil already has been located by Vietsovpetro and the risk is minimal.

In addition, the Vietnamese are clamoring for Western technology because the Soviets, who gained their experience in the Black Sea, are not used to dealing with offshore wells at depths of 300 feet or more.

“We have real difficulties with deep water and would prefer Western companies to help us,” Luyen said. “We know of course American technology is very high, especially in offshore installations. . . .”

Mobil Oil has even proposed a three-way venture with the Soviets and Vietnamese to provide American oil-drilling technology in the Big Bear field, but the proposal would also require the lifting of the embargo.

Apart from desiring advanced Western technology, there is some evidence that the Vietnamese are becoming irritated with shoddy Soviet workmanship. One report suggested that Soviet rigs were out of action 60% of the time.

Vietsovpetro currently employs about 5,000 people, one-fifth of them Soviet oil-field workers based in the beach resort of Vung Tau.

“We know that Soviet equipment and facilities have some shortages of quality,” Luyen commented.

Flush with dollars, the joint Soviet-Vietnamese company is now buying its equipment in the West. It recently took delivery of a drilling ship built in Singapore and is buying spare parts from Japan.

Once produced, the oil is pumped to a tanker moored offshore. The oil is then sold overseas, with about one-third going to the Soviet Union and the rest divided between Singapore and Japan. Japan’s Mitsubishi buys an estimated 50% of Vietnamese oil and is holding discussions to begin exploration on its own.

Despite the bright prospects, exploration is not without considerable risks. Enterprise Oil of Britain last year drilled three test wells, two of which were dry. The third produced only 300 barrels a day.

In fact, none of the Western companies, which have invested a total of $200 million in exploration so far, have found any commercial quantities of oil.

Nonetheless, Enterprise said it is determined to press the search for new finds, and it has applied for even more licenses to explore.

“We’re a committed and keen player in Vietnam,” said Enterprise spokesman Ray Dafter.

Black Gold Off Vietnam OIL EXPLORATION LEASES BHP--Broken Hill Proprietary, Australia BP-British Petroleum ENT--Enterprise Oil, Britain IPL--International Petroleum Ltd., Canada ONGC--Oil& Natural Gas Commission, India P-C--Petroleum, Canada PC--Petrocorp, New Zealand PERT--Pertamina, Indonesia PET--Petronas, Malaysia PF--Petrofina, Netherlands Sceptre-Sceptre Resources - Canada Shell--Royal Dutch Shell, Netherlands SODECO--Sakhalin Oil Development Corporation Company Ltd., Japan Total - CPF-Total, France VSP--Vietsovpetro, Vietnam/Soviet Union PROSPECTIVE OIL BASINS KNOWN OIL FIELDS

Oil fields one, two and three are located in two basins thought to have large untapped sources of oil. 1 - Bach Ho (White Tiger) Field

2 - Dai Hung (Big Bear) Filed

3 - Rong (Dragon) Field

SOURCE: East-West Center and Viet Petro