Blue Dragon's legacy: learning to do without

The visit by the Phan Van Khai, Prime Minister of Vietnam to the White House Tuesday brings back some memories for Quillnews. During an earlier trip to the US in October 1993, Khai was a deputy premier in charge of economic affairs.  He came to New York to the opening of the UN and was given VIP treatment at the grand ballroom of the Waldorf Astoria by US businesses on Thursday Oct. 7, and hosted at a special luncheon at the Asia Society’s Park Avenue headquarters the next day.  Khai was a pretty savvy operator.  At the time, I thought his speech at the Asia Society luncheon about the importance of sound business principles in economic development could have been given at any village Chamber of Commerce in rural Connecticut by a Republican candidate for the board of selectman. 

At that time, the Vietnam and the US governments were organizing the lingering details to end the post-war US embargo. US businesses were positioning themselves to do business in what all believed would be a post-embargo business rush.  Part of the expectation in those days was that offshore Vietnam would turn out to be a boom to the oil industry, which is why an oil company soldier like me was involved.

These oil dreams for Vietnam began in December 1974, months before the fall of Saigon, when Mobil first discovered oil at 9,929 feet in Block 9 in a structure called Bach Ho (White Tiger) offshore South Vietnam in the South China Sea.  Two other geologic structures were identified nearby – Dai Hung (Big Bear) and Thanh Long (Blue Dragon) as likely to contain petroleum reserves.  Mobil’s well at Big Bear had reached 5,500 feet in depth when the government of South Vietnam fell of communist forces, who within days sent a gunboat to chase the Yankee drillers and their Asian roughnecks away.  The Big Bear well was taken over by Russians later and oil was discovered there as well.  These two discoveries formed the core of the Vietnamese oil industry and were developed by a Vietnamese Russian joint-venture, called VietSovPetro.  Russia said this joint-venture was the single most valuable ex-pat company they operated anywhere in the world, and Vietnam said half of its hard currency earnings came from these offshore oil operations. These two oil reserves, White Tiger and Big Bear, were such an icon of state, images of the offshore facilities were placed on Vietnam's 2,000 dong note. After the communist victory and the fall of Saigon, the Russians would soon wear out their welcome in Vietnam.  They had used the Vietnam-based oil operation like a Russian-only country club for 2,000 Russian ex-pats and their families, and not trained enough Vietnamese to suit the government eager to develop home grown technical talent.  The off shore operations at White Tiger and Big Bear were badly designed, very poorly maintained, and the oil reserves, estimated to be up to a billion barrels, was being squandered by poor development. 

After the fall of the Soviet Union forced Vietnam to adopt economic reforms to survive, the Vietnamese wanted the international oil industry to come back.  The Vietnamese particularly wanted Mobil to return to the Blue Dragon prospect, to discover the oil all were sure was there and help the country realize its economic potential.  The earnings from these oil discoveries, it was hoped, would help Vietnam develop so it could continue its historic quest to remain independent from China.  Of course China, having always considered Vietnam Annan (the pacified south) had other ideas. It also wanted the oil offshore and made specious claims on the Parcel and Spratly Islands in the South China Sea as an excuse to claim offshore Vietnam lands as Chinese. After the embargo’s restrictions were lifted, Mobil gained a license to drill Blue Dragon in 1994. But by 1995 the Blue Dragon well was drilled and declared dust.  Other wells in the region were disappointing.  The drilling environment was difficult and costly: the weather was too changeable, the water too shallow, the currents too strong. The petroleum boom that all dreamed would explode riches through Vietnam and its neighbors around the South China Sea from oil discoveries was a bust. (Welcome to the oil business.) Though other factors figured into the fate of my company as well, Mobil’s failure to find oil offshore Vietnam was a huge blow to its future and figured in its acquisition by Exxon in 1999. (Editor's aside: I wrote a book about this).

But the energy realities of the region remain.  Oil and energy security will be on the agenda when Khai visits with President Bush today. However, now instead of competing over oil discoveries and drilling rights nearby, China and its East Asian neighbors are forced to rely on oil and gas shipped from the Middle East. Pressure on security of the sea lanes remains paramount to every state in the region where no one trusts anybody else. China’s military build up, partly in its blue water navy to project military power at sea, continues and is causing nerves to twitch in the region.  Now, instead of working to deal with the riches of oil at home, Vietnam and the US find themselves again talking about oil again – this time keeping sea lanes for oil transportation open. 

When Khai appears in the White House to discuss mutual interests, the US and Vietnam can discuss the US desire that Vietnam take a more active role in the region’s defenses, and that Vietnamese cooperate with its regional neighbors – notably Japan and Australia – to assure that all shipping in the region remains secure from pirates, terrorists or bully states. (Fourth Rail, WRMead in LAT)  Despite the wrongs, the lingering memories (LGF) and open wounds, the chapters of history that the US and Vietnam wrote together in war are largely completed.  The caravan of history has moved on; and oil, as always, must flow. (QN)   

The economic development of the region continues, if without the kick-start rocket booster from oil discoveries. The US-ASEAN Business Council, the US-Vietnam Trade Council and the ASEAN countries are all working on regional development ties.  The US and Vietnam Bilateral Trade Agreement, signed in 2001 and enhanced in 2003, is the foundation for continued ties between the US and Vietnam. In 2004, Vietnam exported $5 billion of goods to the U.S. and imported $1.13 billion of U.S. goods.  Similarly, the US private sector invested $66 million to Vietnam projects last year. It ain’t that much, but it’s a start, and its way better than the war we shared.