Block B- O Mon is one of the largest gas projects in Vietnam up to date, with a total investment of roughly USD 10 billion.

Block B- O Mon is one of the largest gas projects in Vietnam up to date, with a total investment of roughly USD 10 billion for many sub-projects from upstream to downstream. According to PVN, an estimated USD 19.23 billon will be added to the state budget during the project’s 20-year lifetime from gas field development and pipeline projects.

Furthermore, four gas-fired power plants in O Mon would bring a total capacity of 3,810MW, supplementing power supply for the South in the future. Thus, Mr. Nguyen Ngoc Hai, analyst at VNDirect, believes the start of a giant project like Block B–O Mon will be a growth driver for companies in Vietnam’s oil and gas value chain, strengthening the industry’s fundamentals and driving oil and gas companies’ earnings growth in coming years.

At the meeting with Can Tho authorities in May 2022, the representative of PVN said that Block B – O Mon chain could be awarded FID in July 2022, setting the stage for the Block B – O Mon project to kick off in 2H22F. Besides, the operator of Block B gas field (Phu Quoc POC) has been in the process of EPCI tenders opening, aiming to award gas field development-related contracts (EPCI contract, FSO contract, etc.) as soon as Block B chain receives FID. These signal that the time for the Block B kick-off is coming. Therefore, Mr. Nguyen Ngoc Hai expects the first gas for this project to be in late 2025F or early-2026F.

"The leading companies in the oil and gas industry have more chances to trail the Block B project footprint, including the upstream services providers and EPC contractors like PVS or PVD. Besides, as a major investor in Block B – O Mon pipeline (occupying 51% of total investment), we also believe GAS to be a key beneficiary from this project thanks to the Block B’s additional gas source and gas transportation tariff", said Mr. Nguyen Ngoc Hai.

As a member of PVN, Mr. Nguyen Ngoc Hai believes PVS and PVX (including its subsidiary PXS) will be able to participate in EPC activities for gas field development in a consortium with foreign contractors. Notably, PVS has proven its abilities in constructing oil field platforms in both domestic and overseas markets, such as Sao Vang - Dai Nguyet, or the Gallaf project in Qatar.

PVS will participate in this package bid. Currently, PVS is the biggest FSO/FPSO provider in Vietnam, operating six FSO/FPSO in Vietnam in the form of joint ventures with foreign partners. Thus, Mr. Nguyen Ngoc Hai appreciated the possibility that PVS would win this FSO contract.

In the meantime, drilling is always one of the first steps of upstream production projects. Mr. Nguyen Ngoc Hai believes that this could provide long-term job opportunities for a drilling service company like PVDrilling (PVD).

Upside risks for oil and gas stocks include faster-than-expected project progress and a higher-than expected workload for local upstream service providers. Meanwhile, the key downside risk is the further delay in this project’s investment approval and EPC award.