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Vietnam Energy Forum

Venezuelan partners and PVN, PVEP discussed the Block Junin 2 oil and gas project

 - The Petroleum Exploration and Production Corporation (PVEP) informed that Vietnam Oil and Gas Group (PVN) and PVEP have just joined the working group of the Central Committee of Internal Affairs, led by Head of the Committee Phan Dinh Trac visited and worked in the Republic of Venezuela. In the framework of the business trip, PVN, PVEP and Venezuelan partners discussed the Block Junin 2 oil and gas project.
Venezuelan partners  and PVN, PVEP discussed the Block Junin 2 oil and gas project
Head of the Central Internal Affairs Commission Phan Dinh Trac visits the photo exhibition "Traditional Friendship and Comprehensive Partnership between Vietnam and Venezuela" organized by VNA in coordination with the Vietnamese Embassy in Venezuela, in Caracas Capital.

Specifically, the delegation had an important working session with the Presidential Office, the Venezuelan Ministry of Petroleum (MINPET), Vietnam - Venezuela Friendship Committee, the Venezuelan Ministry of Foreign Affairs, the Venezuelan National Petroleum Company (PDVSA) and the Venezuelan Petroleum Corporation (CVP) - PVEP's partner at Block Junin 2 project.

During the discussion, Minister and Chairman of the Presidential Office Jorge Elieser Marquez and Minister of MINPET Jorge Elieser Marquez affirmed that the Junin 2 Block project is the result of good traditional friendly cooperation between Vietnam and Venezuela.

Therefore, project implementation must bring harmonious benefits to the two states, as well as PVEP and CVP investors.

The Minister, Chairman of the Presidential Office and Minister of MINPET said that restarting energy cooperation between the two countries (the cooperation project between PVEP and CVP) is the expectation of President Nicolas Maduro Moros in particular, as well as the leaders of the two States in general.

During the exchange, the Venezuelan side announced that, with the positive changing environment of the economy, polity and investment t in Venezuela and the US embargo on Venezuela tended to loosen. The foreign investors also consider returning and the fact that PVN and PVEP come to Venezuela to work at this time is very welcome.

Venezuelan partners  and PVN, PVEP discussed the Block Junin 2 oil and gas project
PVN, PVEP and Venezuelan partners discussed the Block Junin 2 oil and gas project.

On behalf of the Vietnamese side, Deputy General Director of PVN Le Ngoc Son and General Director of PVEP Tran Hong Nam said that the purpose of the business trip is to accompany the senior leadership of the Communist Party of Vietnam to visit and work in Venezuela. At the same time, continue to implement the common conclusions of the two sides (in May 2023).

For the Block Junin 2 project, the task of PVEP is to be responsible to the Vietnamese Party, State, Government and people for the investment in the project and must continue to develop and maintain diplomatic relations and cooperation in the fields of oil, gas and energy between the two countries.

The two sides agreed on their views and comments that Block Junin 2 has faced difficulties, so it is necessary to evaluate the project most carefully and together to find solutions to overcome those difficulties.

"In a favorable situation, you only need one solution, but in a difficult situation, you have to find a thousand solutions" Minister Pedro Rafael Tellechea emphasized. On that basis, the two sides agreed to propose to the Venezuelan Government to create maximum conditions for energy cooperation between the two countries in the near future.

It is to say this is the next business trip of PVN and PVEP in May 2023. On that basis, establishing a Joint Research Team to re-evaluate the economic efficiency of the project based on the economic and social situation, ensuring benefits for investors (PVEP and CVP), through the Petromacareo Joint Venture Company (Currently, the Petromacareo Joint Venture has stopped exploitation activities, waiting for further decisions from both sides).

In the context of the volatile world economic and political situation and the global energy transition trend, arranging investment capital from international banks for traditional energy projects faces many difficulties.

For Junin 2 - the heavy oil project with many impurities, leading to a rather complex investment model, according to the nature of the chain (including a rigged system, exploitation wells and a plant to upgrade and process heavy oil into commercial product oil) leading to high investment costs, but low economic efficiency.

With the economic situation of the host country, high inflation and the United States not yet lifting the embargo, as well as the very low economic efficiency of the project, it can be said that, even if the host side does not request PVEP to comply with contractual commitments (including 142 million USD signature bonus), operating costs and capital contributions to the Joint Venture (about 250 million USD), so project implementation also faces many difficulties. Because these costs do not include investment costs for well rigs and heavy oil upgrade refineries (estimated at more than 3 billion USD).

Currently, with the need to handle long-term loss-making projects in the past under the PVN and PVEP restructuring project, from this business trip it can be seen that it is time for the Politburo and the Prime Minister to have a final decision (based on PVN and PVEP's proposals) for their focusing on domestic and the energy international profitable projects.

In terms of foreign affairs, the Block Junin 2 project also needs to have a final solution to maintain bilateral partnership and cooperation (economic, political, cultural...) between Vietnam and Venezuela in particular. as well as the South American region as well as the South American region and the world in general, aiming at the need for stability for economic development and enhancing Vietnam's role in the international arena./.

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