EXXON, PETROVIETNAM INK CONTRACT FOR PRODUCTION

C O N F I D E N T I A L HANOI 000640 SENSITIVE SIPDIS STATE FOR EAP/MLS MBROWN STATE FOR EEB/ENR ENERGY FOR TOM CUTLER AT INTERNATIONAL AFFAIRS COMMERCE FOR 4430/MAC/AP/OPB/VLC/HPPHO E.O. 12958: DECL: 07/09/2019 TAGS: ECON EFIN EINV ENRG EPET PREL VM SUBJECT: EXXON, PETROVIETNAM INK CONTRACT FOR PRODUCTION SHARING QUIETLY REF: A. A) HANOI 52 (2008 RECAP OF SOUTH CHINA SEA DISPUTE) ¶B. B) HANOI 525 (GAZPROM EXPANDING IN VIETNAM) Classified By: DCM Virginia Palmer, E.O. 12958, Reasons: 1.4 (b) and (d ) ¶1. (C) ExxonMobil (EM) and state-run PetroVietnam (PVN) quietly signed a production sharing contract (PSC) on June 30 for two sets of blocks in the South China Sea that lie well within China,s line of demarcation. The deal makes EM the largest offshore acreage holder in Vietnam, with 14 million acres. ¶2. (C) At a June 23 meeting with the Charge, ExxonMobil Vietnam,s President Russ Berkoben previewed the deal and plans for quiet signing given sensitivities with China (REF A). The PSC moves EM,s cooperation with PVN beyond completed feasibility studies to seismic exploration, primarily for natural gas. Berkoben said EM consolidated the two sets of blocks (blocks 117/8/9 approx. 50 miles east of Danang, and blocks 156/7/8/9 approx. 325 mi. SW of Ho Chi Minh City) into one PSC, in part to minimize a possible repeat of China's negative reaction to EM's previous activities in the area. Both sets of blocks fall within China,s line of demarcation, the "cow's tongue." Berkoben said that although EM is uncertain of China,s reaction, it is ready if China reacts. Berkoben also noted that Russian state-owned energy firm Gazprom is conducting seismic exploration in nearby similarly-disputed Blocks 129-132 (REF B) and has not experienced interference from China in its operations. END MICHALAK MICHALAK