Vietnams PV drilling Making country Hottest investment Zone in Asia

The Semi-submersible TAD Rig – PV DRILLING V – at Hai Thach Moc Tinh Gas Field, offshore Vietnam Photo: World finance

The petroleum industry has helped Vietnam become one of the hottest investment destinations in Asia, and despite oil prices taking a hit this year, there is still room for expansion, PV Drilling reports
In Southeast Asia, Vietnam has emerged as one of the most attractive destinations for business investment and development, becoming the location of choice for many prestigious economic organisations. Contributing to the fast-paced transformation of the country is its rich petroleum resource. The first few preliminary oil and gas explorations took place in the early 1960s. Due to the paucity of necessary infrastructure, manpower, and technology, the industry had to depend heavily on outsourcing from foreign companies. Particularly in the oil and gas-drilling field, until the 1990s, the whole market was still a private playground of foreign drilling contractors.

In that context, PV Drilling was founded in 2001 with the strategic mission to master the drilling technology and promote the self-independence of the domestic oil and gas industry so that Vietnam could take the active role in moderating its exploration and production activities. At the early period, with limited resources and facilities, the firm only provided a small-scaled scope of services including drilling tool rental, repair and inspection, provision of manpower and oil spill control service.

The current market conditions have hurled all drilling contractors into the toughest competition ever in the history of
this industry

The first of many
However, with vision of becoming an internationally reputable and reliable drilling contractor, PV Drilling made the audacious move to sign the first rig construction contract with Keppel FELS in 2005, to build the modern jack-up PV DRILLING I. The rig was completed and towed back to Vietnam for operation in March 2007. In parallel with the rig construction, its management and staff also spent a great amount of effort to build supply base facilities, research and study the drilling technology, set up operation and management procedures and train the rig crew.

Though confronting numerous obstacles at the beginning, the company has gradually tackled all arising issues with unwavering determination spirit. The first drilling campaign of PV DRILLING I for its client Hoang Long Joint Operating Corporation has resulted in a remarkable success and thus, encouraged PV Drilling to move further forward.

In 2009, PV Drilling brought into operation two premium jack-up rigs PV DRILLING II and PV DRILLING III simultaneously, marking a memorable milestone in the development of the company. Amid the trend of jack-up rigs, the company also recognised the huge untouched potential of deep-water drilling in the Vietnamese market. Therefore, the project of constructing the semi-submersible tender assist drilling (TAD) PV DRILLING V was kick-started to catch up on such an opportunity. After finishing the construction in 2011, this one-of-a-kind, state-of-the-art rig was engaged in a long term, five-year contract to operate at a significant gas reservoir in Nam Con Son Basin.

The most recent member of PV Drilling’s fleet is the Keppel FELS Enhanced B-Class Jack-up Rig PV DRILLING VI, which was completed in early March 2015 and mobilised immediately for operation at Dai Hung Field, at Vietnam water. The newly built rig has performed beyond expectation with an outstanding efficiency over 98 percent and a flawless non-productive time and lost time incident record.

To support the efficient operation of the rig fleet, PV Drilling has unceasingly reinforced its infrastructure and human resource. At present, the company takes pride in its modern rig fleet and supporting facilities onshore, together with a strong capable team of approximately 1,000 skilled rig crew members. In addition, the firm deployed an integration of a modern IT-based management system with many diversified functions. The management system has ensured the coordination of all the linkages in the whole corporate mechanism to run harmoniously and effectively throughout the past years.

Beside consolidating its internal strength, PV Drilling has established a broad network of strategic partnerships and joint ventures with renowned oil and gas companies all around the world, Baker Hughes, BJ, Expro, Marubeni Itochu and Oil States Industries, to name a few. These strategic joint-ventures played a key role in bridging the company with high-tech services, latest advances in drilling technology and provided valuable experience to enhance the service quality and business efficiency.

Strategic action
The past year marked the most successful period to date for the company, with remarkable business results of VND 20.88trn ($978m) in net revenue and VND 2.41trn ($107m), marking an exemplary compound annual growth rate of 38.5 percent during the past five years. The total yield-to-date asset value also reached $1.2bn. In the domestic market, PV Drilling occupied a 70 percent market share for providing drilling rigs and well technical services for oil and gas operators’ drilling campaigns.

This year, however, came with a nebulous outlook for the oil and gas industry when oil prices continuously dropped due to an imbalance of supply and demand on global scale. Oil lost almost 60 percent of its peak value in 2014, leading to a significant amount of exploration and production projects suspended and terminated. In Southeast Asia, and respectively in Vietnam, the decline of drilling activity together with the birth boom of new-built rigs have further aggravated the situation, causing huge impacts to drilling contractors. IHS’s current report estimates a release of 83 new jack up rigs by end of 2015 and 57 more to kick in by 2016, despite the halted demand. The consequence of such redundancy took significant toll on rig’s day-rate fixture, which has decreased by almost half in comparison to the apex of 2014. The current market conditions have hurled all drilling contractors into the toughest competition ever in the history of this industry.

In confronting these challenges, PV Drilling shall focus first on the domestic market. In fact, there are about 25 appraisal-exploration wells and 50 production wells anticipated to be drilled in Vietnam during 2016 and such a workload shall require 10-12 rigs on a frequent basis. Possessing the competitive edges including its available supporting infrastructure, the track-proven operational capability, the first-hand knowledge of domestic market insight, the company could offer clients with the best and cost-effective solution for their drilling operation. Under the current circumstance, operational efficiency and cost factors will be most concerned to all operators when it comes to select a contractor. Therefore, willingness to compromise the profit to share the cost impact with clients as well as maintain its premium service quality would be PV Drilling’s pragmatic approach to secure steady work for its rig fleet.

Investment and development
Additionally, PV Drilling will continue to implement its strategy of investment and development in other regional areas in Southeast Asia with great potential, particularly Malaysia, Brunei, Thailand, Myanmar and Cambodia. Focal points of this expansion strategy will be the provision of well technical services including mechanical services, fabrication, tool rental, tubular running, conductor, well testing, mud logging, wireline logging, slickline, fracturing, cementing, logging while drilling, measuring while drilling and directional drilling. The company shall deploy the special bundled service as an effective weapon to gain competitive edges over local competitors thanks to its considerable cost and time-saving benefits.

In the market downturn, PV Drilling anticipates the bounce-back of the industry within two to three years. It would be necessary to take advantage of this idle period to consolidate the inner strength and prepare to rise with the market resurgence when oil price gets back to its normal trajectory. In fact, PV Drilling shall maintain the strategic plan to acquire one to two modern jack-up rigs and one semi-submersible within the next five years. The projects could be implemented under joint-venture form and these new facilities shall enable us to venture further into the deep water areas with complex operational conditions, open up a whole new horizon for business development.

Despite the fluctuation of the market, PV Drilling is confident that it is heading toward a right direction with an appropriate strategy of investment and operation, which is in line with the long-term trend of the industry. Thus, the company shall keep pursuing its vision with great passion and exert the best effort to overcome all the challenges, improve its service quality and create more value added to better serve its clients and maintain future sustainability.

first published in World finance

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