More than a month after the new Law on Petroleum was enacted, revisiting its core principles has taken on particular importance. Assessing the significance of this legislative milestone, Dr. Phan Duc Hieu, Member of the National Assembly (NA)’s Economic and Financial Committee, who directly participated in discussions and revisions of the draft, described it as a major achievement, saying it reflected the sustained efforts of the drafting and reviewing bodies, together with NA deputies, to translate the government’s expectations for this specialized legislation into law.
Proactive administrative framework
Looking over the governance structure established by the new Law, Dr. Hieu said the documents submitted to the NA distilled the energy sector’s strategic objectives into two overarching principles.
First, oil and gas remain important components of Vietnam’s primary energy mix. Energy is not simply a matter of commercializing natural resources or ensuring the supply of ordinary commodities. In the long term, it is closely tied to economic development and directly determines the country’s independence and autonomy.
Second, oil and gas resources must be managed in the context of the global energy transition. He noted that while Vietnam remains committed to reducing net emissions, the transition to a greener economy requires a realistic roadmap aligned with the country’s available resources. Oil and gas remain essential transition fuels that cannot be replaced immediately. Developing oil and gas potential is not incompatible with sustainability. Rather, it generates State revenue, foreign currency, and technical infrastructure that can be reinvested in clean energy.
This approach goes hand-in-hand with upgrading the entire value chain. The growth model cannot continue to rely on exporting raw resources. Rather, the goal must be to master scientific and technical capabilities and build domestic technological capacity to develop a complete service value chain.
To put these priorities into practice, the Law on Petroleum introduces a major advance in governance, emphasizing an enabling approach through extensive decentralization and the removal of administrative barriers. Rather than distributing responsibilities in name only, the Law establishes a clear framework that links each agency’s authority to its implementation responsibilities.
Under this framework, the Prime Minister focuses on major issues involving national defense and security and maritime sovereignty. Technical, commercial, and routine operational matters are delegated to the Ministry of Industry and Trade (MoIT), which assumes full responsibility to the Prime Minister and the State for decisions within its assigned authority.
Another key governance principle reflects the specific characteristics of offshore oil and gas operations. This is a technically-complex industry involving substantial geological risks and substantial capital requirements.
On this basis, the legal status of the Vietnam National Industry - Energy Group (Petrovietnam) is defined through a model that separates two distinct roles. On the one hand, the Group participates in the market as an independent contractor, on equal footing with other investors, and assumes responsibility for its own business performance. On the other, it is authorized by the State to carry out specialized technical management and oversight of petroleum contracts. This distinction helps resolve long-standing ambiguity between regulatory oversight and commercial operations.
A fundamental breakthrough is the firm application of the principle that once authority has been delegated, the recipient must make decisions independently and remain accountable for the outcomes. Alongside decentralization, procedural reforms aim to establish a more proactive administrative framework.
Notably, the Law on Petroleum is the first piece of legislation to formalize an investment process for integrated project chains. Dr. Hieu explained that investment laws typically regulate projects separately according to administrative boundaries and sectors. Natural gas projects, however, comprise interconnected facilities stretching from offshore fields to onshore gas-fired power plants and often spanning multiple localities. The previous fragmented approval process could create bottlenecks at individual stages.
Under the new provisions, the entire project chain can be assessed through a single appraisal dossier led by the MoIT, followed by one overarching investment policy decision. This approach is designed to eliminate legal and procedural conflicts.
Financial incentives
With most major oil fields entering natural production decline and new discoveries increasingly concentrated in small and marginal fields or costly deepwater and remote offshore areas, Dr. Hieu warned that uncompetitive fiscal policies could drive investment capital to other countries.
To attract investment, the Law on Petroleum establishes different levels of incentives tailored to individual fields. The standard incentive level - the least favorable - provides for a corporate income tax rate of 32 per cent, a natural resource tax rate of 10 per cent, and a maximum cost recovery rate of 70 per cent.
The special incentive level, meanwhile, provides for a corporate income tax rate of 25 per cent, a natural resource tax rate of 5 per cent, and a cost recovery rate of 80 per cent. And the enhanced special incentive level for marginal fields builds on the special incentive package and adds further benefits, such as a cost recovery mechanism designed to allow all eligible costs to be recovered.
The project-specific incentive level, determined by the Prime Minister, applies to strategic fields or projects involving national defense and security. The Prime Minister may approve tailored incentives outside the general framework based on a balancing of costs and benefits.
In addition to these four levels, the Law introduces technical incentives for the application of technologies that improve oil and gas recovery rates. “In practical terms, the oil and gas industry now operates with five coordinated incentive mechanisms, creating a more open and regionally-competitive economic framework,” Dr. Hieu explained.
To promote scientific and technical capabilities and oil and gas services, the Law includes a dedicated chapter and provisions encouraging technology transfer and domestic technology development. The immediate goal is to maximize support for Vietnam’s oil and gas industry, with the longer-term ambition of securing a deeper role in regional and international oil and gas services markets.
The PetroVietnam Technical Services Corporation (PTSC), a subsidiary of Petrovietnam, has performed strongly in oil and gas technical services and established a presence in international markets. The policy aims to foster many more enterprises with similar capabilities.
Another advance allows depleted fields or fields approaching the end of their contract terms to have their infrastructure repurposed for carbon capture and storage (CCS) and offshore energy development.
Proactive energy transition
For the Law’s enabling principles to deliver tangible results, Dr. Hieu said implementation will require close coordination between central regulatory agencies and coastal local governments. A shared understanding of its contents is essential to ensuring that decentralization does not lead to agencies shifting responsibility to one another.
At the same time, the breakthrough fiscal incentives must be translated into detailed implementing decrees without delay to ensure consistency and policy stability for investors. For oil and gas enterprises, greater autonomy also brings an obligation to strengthen risk management, establish robust internal control systems, and maintain high standards of accountability.
Closer collaboration between the oil and gas industry, research institutes, and universities to train highly-skilled personnel in emerging technologies, including enhanced oil recovery and carbon storage, would also provide a solid foundation for long-term development. Integrating green solutions into existing infrastructure, such as offshore platforms and pipelines, could reduce costs while advancing the principles of the circular economy.
“Overall, the Law on Petroleum establishes a modern legal framework that responds to urgent practical needs,” Dr. Hieu believes. “It not only removes legal bottlenecks that have accumulated over many years but also sets out a path for proactive adaptation to the global energy transition.” He also expressed confidence that effective implementation would help the oil and gas industry maintain its role as a pillar of the economy while safeguarding Vietnam’s energy security and maritime sovereignty.
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