Comparative analysis of financial assurance instruments for oil and gas decommissioning and mine restoration

-mentioned bond instruments are applied 
restoration/decommissioning cost. 
 to oil and gas decommissioning in Vietnam, some 
 The third desirable option for the government should amendments need to be considered. Cash collateral 
be decommissioning and abandonment provisions. bonds and lease-specific abandonment accounts will 
Getting annual moneys until the year when the operator become more advantageous to the operator if the 
goes in liquidation (if this is the case), it is more reliable upfront fund in the former and the money in the account 
for the government than the surety bond option in which in the latter can be used by the operator to carry out 
they need to calculate the bond quantum precisely decommissioning activities during the project and any 
and monitor carefully throughout the project phases to interest earnings can be returned to the operator annually 
ensure the bond money is adequate for the remaining to support its capital needs. In addition, the upfront fund 
restoration/decommissioning liability. The operator for cash collateral bonds and the initial payment for 
is more advantageous with this option than with the lease-specific abandonment accounts can be deposited 
cash collateral bonds and lease-specific abandonment within one year since the production of the first oil and 
accounts since they can pay the decommissioning fund gas. Regarding the decommissioning and abandonment 
in annual portions over the whole project life or the field’s provision approach which has been applied to oil and gas 
producing life. decommissioning in Vietnam, the Government should be 
 cautious of the potential deficiency of decommissioning 
 Among the four options, surety bonds are least 
 funds if operators go into liquidation at some point within 
reliable to the government due to issues associated with 
 the project life. For all those types of bond instruments, 
bond securing while the operator may not undertake 
 the Government in collaboration with PVN needs to 
the required restoration/decommissioning during the 
 monitor operators’ compliance stringently to ensure the 
project life and go into liquidation near the end of 
 money withdrawn from the financial guarantee fund 
the project to avoid using their out-of-pocket funds in 
 is equivalent to the decommissioning work execution. 
addition to the annual premiums to maintain the bond to 
 Furthermore, as the manager of the financial guarantee 
cover restoration/decommissioning activities. However, 
 fund, PVN needs to deal with any arising administrative 
if the government is successful in bond securing, they are 
 issues diligently.
more advantageous than under the decommissioning 
and abandonment provision approach due to being Acknowledgement
paid by the surety company for the exact outstanding 
restoration/decommissioning liability in case the This work was funded by Petrovietnam University 
operator becomes insolvent at some point of the project under grant code GV1903. 
life. On the contrary, the operator is most advantageous References
under this approach. Clearly, with this approach, 
the operator does not have to pay either an upfront [1] D.F. Ferreira and S.B. Suslick, “A new approach for 
fund equal to the total restoration/decommissioning accessing offshore decommissioning: A decision model 
cost like with the cash collateral bonds or payments for performance bonds”, SPE International Conference 
equating to the total restoration/decommissioning cost on Health, Safety, and the Environment in Oil and Gas 
within four years or an initial payment equivalent to Exploration and Production, Stavanger, Norway, 26 - 28 
half of the restoration/decommissioning cost like with June, 2000. DOI: 10.2118/61219-MS.
the lease-specific abandonment accounts. If the project [2] World Bank Multistakeholder Initiative, “Towards 
lasts more than 10 years and the operator chooses sustainable decommissioning and closure of oil fields and 
to liquidate just after the fourth year of production/ mines: A toolkit to assist government agencies”. 2010.
extraction, the annual premiums to keep the bond in 
place within four years are much lower than the annual [3] Silvana Tordo, Fiscal systems for hydrocarbons: 
payments out of the total restoration/decommissioning Design issues. World Bank, 2007. 
cost and thus the operator is more beneficial than with [4] Alison Leigh Browne, Daniela Stehlik, and Amma 
 PETROVIETNAM - JOURNAL VOL 6/2021 51
PETROLEUM ECONOMICS & MANAGEMENT
Buckley, “Social licences to operate: for better not for [14] Katherine Lynn Baker, Costs of reclamation on 
worse; for richer not for poorer? The impacts of unplanned Southern Appalachian Coal Mines: a cost-effectiveness 
mining closure for “fence line” residential communities”, analysis for reforestation versus hayland/pasture 
Local Environment, Vol. 16, No. 7, pp: 707 - 725, 2011. DOI: reclamation. Virginia Polytechnic Institute and State 
10.1080/13549839.2011.592183. University, 2008. 
 [5] D.F. Ferreira and S.B. Suslick, “Identifying potential [15] Mark J. Kaiser, Brian F. Snyder, “Supplemental 
impacts of bonding instruments on offshore oil projects”, bonding in the Gulf of Mexico: the potential effects of 
Resources Policy, Vol. 27, No. 1, pp. 43 - 52, 2001. DOI: increasing bond requirements”, International Journal of 
10.1016/S0301-4207(01)00007-1 . Oil, Gas and Coal Technology, Vol. 2, No. 3, pp. 262 - 279, 
 2009.
 [6] P.H. Whitbread-Abrutat, A.D. Kendle, and N.J. 
Coppin, “Lessons for the mining industry from non-mining [16] Ryan Yonk, Josh.T. Smith, and Arthur R. Wardle, 
landscape restoration experiences”, Mine Closure 2013, “Exploring the policy implications of the surface mining 
Australian Centre for Geomechanics, pp. 625 - 640, 2013. control and reclamation act”, Resources, Vol. 8, No. 1, pp. 
DOI: 10.36487/ACG_rep/1352_52_Whitbread-Abrutat. 1 - 18, 2019. DOI: 10.3390/resources8010025. 
 [7] David Gerard, “The law and economics of [17] Flávia Kaczelnik Altit and Mark Osa Igiehon, 
reclamation bonds”, Resources Policy, Vol. 26, No. 4, pp. 189 “Decommissioning of upstream oil and gas facilities”, 
- 197, 2000. DOI: 10.1016/S0301-4207(00)00033-7. Proceedings of the 53rd Annual Rocky Mountain Mineral 
 Law Institute, The Rocky Mountain Mineral Law 
 [8] U.S. Energy Information Administration, “Vietnam”. 
 Foundation, 2007. [Online]. Available: 
[Online]. Available: https://www.eia.gov/international/
 schweitzer-online.de/static/catalog_manager/live/
analysis/country/VNM.
 media_files/representation/zd_std_orig__zd_schw_
 [9] D. Burdon, S. Barnard, S.J. Boyes, and M. Elliott, orig/000/046/457/9781905783236_content_pdf_1.pdf.
“Oil and gas infrastructure decommissioning in marine 
 [18] F. Jahn, M. Cook, and M. Graham, “Chapter 
protected areas: System complexity, analysis and 
 18: Decommissioning”, Developments in Petroleum 
challenges”, Marine Pollution Bulletin, Vol. 135, pp. 739 - 
 Science, Vol. 55, pp. 419 - 425, 2008. DOI: 10.1016/S0376-
758, 2018. DOI: 10.1016/j.marpolbul.2018.07.077.
 7361(07)00018-0.
 [10] Vietnam News, “PVN sets target of adding up to 
 [19] East Ayrshire Council, “Planning permission 
30m tonnes to oil reserves”, 15/3/2019. [Online]. Available: 
 for application Ref. 09/0511/PP dated 30 March 2011”, 
https://vietnamnews.vn/economy/507134/pvn-sets-
 Planning Application Ref. 09/0511/PP, East Ayrshire 
target-of-adding-up-to-30m-tonnes-to-oil-reserves.html.
 Council, 2011. [Online]. Available: 
 [11] D.F. Ferreira and S.B. Suslick, “Financial assurance east-ayrshire.gov.uk/online/applicationDetails.
bonds: An incentive mechanism for environmental do?activeTab=documents&keyVal=KMPQAYGF01B00. 
compliance in the oil sector”, SPE International Conference 
 [20] East Ayrshire Council, “Planning enforcement 
on Health, Safety and Environment in Oil and Gas Exploration 
 notice for Dunstonhill site opencast coal mine, near Patna”, 
and Production, Kuala Lumpur, Malaysia, 20 - 22 March, 
 2/4/2015. 
2002. DOI: 10.2118/74025-MS.
 [21] East Ayrshire Council, “Planning enforcement 
 [12] Doneivan F. Ferreira, Saul B. Suslick, and 
 notice for Netherton opencast coal mine, Skares”, 2/4/2015. 
Paula C.S.S. Moura, “Analysis of environmental bonding 
system for oil and gas projects”, Natural Resources [22] East Ayrshire Council, “Opencast mining in East 
Research, Vol. 12, No. 4, pp. 273 - 290, 2003. DOI: Ayrshire - Steps to recovery”, 19/9/2013. 
10.1023/B:NARR.0000007806.90842.8f.
 [23] East Ayrshire Council, “Minute of agreement 
 [13] Doneivan Ferreira, Saul Suslick, Joshua Farley, among East Ayrshire Council, The Scottish Coal Company 
Robert.Costanza, and Sergey Krivov, “A decision model Limited, SRG Estates Limited, the Scottish Ministers, and 
for financial assurance instruments in the upstream Diana Mary Wheeker”, Planning Application Ref. 08/0783/
petroleum sector”, Energy Policy, Vol. 32, No. 10, pp. 1173 - FL, East Ayrshire Council, 2010. 
1184, 2004. DOI: 10.1016/S0301-4215(03)00080-6.
52 PETROVIETNAM - JOURNAL VOL 6/2021
 PETROVIETNAM
 [24] East Ayrshire Council, “Minute of variation of [37] East Ayrshire Council, “Application Ref. 09/0511/
minutes of agreement among East Ayrshire Council, PP: Proposed extension to Laigh Glenmuir Surface Mine, 
Aardvark TMC Limited, The Partners of and Trustees for the land at Duncanziemere, near Lugar, Cumnock by Aardvark 
Firm of Young Brothers, The Dumfries Estate Trustees and TMC Limited”, Head of Planning and Economic Development 
The Scottish Ministers”, Planning Application Ref. 09/0891/ to the Southern Local Planning Committee dated 27 May 
PP, East Ayrshire Council, 2010. 2010, Planning Application Ref. 09/0511/PP, East Ayrshire 
 Council, 2010. 
 [25] East Ayrshire Council, “Minute of variation 
among East Ayrshire Council, ATH Resources Plc, Aardvark [38] East Ayrshire Council, “Application Ref. 09/0891/
TMC Limited, and Denise Tait Chambers”, Planning PP: Phased extraction of coal by surface mining methods 
Application Ref. 09/0511/PP, East Ayrshire Council, 2011. with progressive restoration and ancillary works on 
 land at Netherton, off Newfield road, near Cumnock by 
 [26] East Ayrshire Council, “Decommissioning, 
 Aardvark TMC Limited”, Head of Planning and Economic 
restoration, aftercare and mitigation financial guarantees”, 
 Development to the Southern Local Planning Committee 
21/5/2014. 
 dated 25 June 2010, East Ayrshire Council, 2010. 
 [27] Jim Mackinnon, Chris Norman, James Fowlie, 
 [39] SLR Consulting Limited, “Planning Application 
“Report of Independent Review of regulation of opencast coal 
 for Proposed Surface Mining Operations at Netherton, 
operations in East Ayrshire”, East Ayrshire Council, 2014. 
 New Cumnock, East Ayrshire: Environmental Statement, 
 [28] East Ayrshire Council, “East Ayrshire Council Planning Statement and Pre-Application Consultation 
response regarding the restoration bonds of Dunstonhill, Report”, Planning Application Ref. 09/0891/PP, East Ayrshire 
Duncanziemere and Netherton”, Email communication to Council, 2009. 
the author, 23/7/2018.
 [40] East Ayrshire Council, “Application Ref. 08/0783/
 [29] East Ayrshire Council, “Application Ref. 13/0865/ FL: Extraction of coal by surface mining methods with 
PP at Duncanziemere Surface Coal Mine, Lugar by OCCW restoration to forestry, parkland, public access and nature 
(Duncanziemere) Limited”, 4/4/2014. conservation interests, Dunstonhill, Lethanhill, Patna by 
 [30] East Ayrshire Council, “Update Report - Netherton the Scottish Coal Company Limited”, Head of Planning 
Opencast coal site restoration bond”, 13/8/2014. and Economic Development to the Special Southern Local 
 Planning Committee dated 17 December 2009, Planning 
 [31] East Ayrshire Council, “Dunstonhill Opencast site 
 Application Ref. 08/0783/FL, East Ayrshire Council, 2009. 
restoration bond”, 19/2/2014.
 [41] East Ayrshire Council and East Ayrshire Health 
 [32] East Ayrshire Council, “Update report - Dunstonhill 
 and Social Care Partnership, Southern locality profile - Local 
and Ponesk Opencast coal site restoration bonds”, 4/6/2014.
 outcome improvement plan summary needs assessment 
 [33] East Ayrshire Council, “Update report - Dunstonhill 2017. The Community Planning Partnership, 2017. 
and Netherton Opencast coal sites - Revised restoration 
 [42] The Scottish Government, “Local area labour 
schemes”, 1/4/2015. 
 markets in Scotland: Statistics from the annual population 
 [34] Thủ tướng Chính phủ, Quyết định về việc thu dọn survey 2013”, 7/5/2014. [Online]. Available: 
các công trình cố định, thiết bị và phương tiện phục vụ hoạt gov.scot/Resource/0044/00449714.pdf.
động dầu khí, Quyết định 40/2007/QĐ-TTg, 21/3/2007. 
 [43] East Ayrshire Council, “Application Ref. 05/0232/
 [35] Thủ tướng Chính phủ, Quyết định về việc thu dọn FL: Proposed extraction of coal by opencast method, 
các công trình, thiết bị và phương tiện phục vụ hoạt động restoration of site and associated engineering works at 
dầu khí, Quyết định 49/2017/QĐ-TTg, 21/12/2017. Laigh Glenmuir farm, near Cumnock by ATH Resources 
 plc”, Head of Planning, Development and Building Standards 
 [36] Scottish Coal Company Limited, “Dunstonhill 
 to the Development Services Committee dated 11 January 
Surface Mine – Amended Planning Application 
 2006, Planning Application Ref. 05/0232/FL, East Ayrshire 
Supporting Statement & Supplementary Environmental 
 Council, 2006. 
Information”, Planning Application Ref. 08/0783/FL, East 
Ayrshire Council, 2009. [44] RPS Planning & Development, “Dunstonhill 
 Surface Mine Environmental Statement - Chapter 5: Need, 
 PETROVIETNAM - JOURNAL VOL 6/2021 53
PETROLEUM ECONOMICS & MANAGEMENT
Benefits & Socio-economic Impacts of the Development”, www.investegate.co.uk/hargreavesservsplc--hsp-/rns/
Planning Application Ref. 08/0783/FL, East Ayrshire Council, acquisition-of-assetsfromaardvark/20130516070011837
2008. 6E/.
 [45] Petrovietnam Technical Services Corporation, [48] Viện Dầu khí Việt Nam (VPI), “Chương 
“Vung Tau - A long-standing Vietnam oil and gas hub”, trình quản lý an toàn dự án vận hành mỏ X”, 2017.
Company News, 2014. 
 [49] Tổng công ty Thăm dò Khai thác Dầu khí, “Biện 
 [46] Petrovietnam, “Tập đoàn Dầu khí Quốc gia Việt pháp phòng ngừa và ứng phó sự cố hóa chất công trình mỏ 
Nam: 44 năm đồng hành, phát triển cùng đất nước, 2019”, X”, 2015. 
[Online]. Available: 
 [50] Lê Thị Huyền, “So sánh các cơ chế bảo đảm tài 
aspx?NewsID=a20f8571-5483-491a-80df-3fbd808cd5c5.
 chính cho công tác thu dọn mỏ dầu khí ngoài khơi và 
 [47] Hargreaves Services PLC, “Acquisition of assets phục hồi môi trường mỏ khoáng sản”, Tạp chí Dầu khí, Số 
from Aardvark”, 16/5/2013. [Online]. Available: https:// 11, tr. 56 - 65, 2020.
54 PETROVIETNAM - JOURNAL VOL 6/2021