Jan. 29 (Bloomberg) -- Vietnam Oil & Gas Group, known as PetroVietnam, should move urgently to open new fields and halt a drop in output from Southeast Asia's third-biggest oil producer, Prime Minister Nguyen Tan Dung said.

Vietnamese crude oil production totaled 17.3 million tons last year, or about 355,000 barrels a day, down 8 percent from output of 18.8 million tons, or about 386,000 barrels a day in 2005, according to figures provided by PetroVietnam. The decline marked the second consecutive drop in production after a near- tripling of output within a decade.

The falloff results largely from a drop in output from the two-decade-old Russian-Vietnamese operated Bach Ho field. PetroVietnam should find ways to stem the production declines in the past two years, Dung told company officials in the capital Hanoi today.

``Crude oil production reached a plateau and has slowed down,'' Dung said. ``You should have a reasonable, effective production plan for this precious natural resource, and at the same time, you also should have an urgent plan to bring new fields into a production phase to cover Bach Ho's decline.''

Bach Ho's output last year slumped 8 percent to 9.15 million tons, or about 191,000 barrels a day, from 9.99 million tons, or about 208,000 barrels a day, in 2005, according to figures from Vietsovpetro, which operates the field.

``Bach Ho's output will decrease every year, but the rate of the decrease will depend on our investment in the field,'' PetroVietnam Chief Executive Tran Ngoc Canh said in an interview today. ``It can decline more quickly if we don't have suitable technical solutions.''

Su Tu Den

Vietnamese oil output has also been affected by a drop in production at the Su Tu Den field, operated by a group including Houston, Texas-based ConocoPhillips.

Output at Su Tu Den declined for a second year in 2006, dropping to an average of about 55,000 barrels a day from about 71,000 barrels a day in 2005. Production at Su Tu Den was cut in late 2005 because of an increase in the level of water produced together with the field's crude oil.

PetroVietnam, which expects overall Vietnamese production this year to increase 1 percent to 17.5 million tons, is carrying out studies ``to work out a new production outline'' for Bach Ho, said Canh.

``Some new oil fields will be brought into operation as well,'' he said, declining to give details.

Among potential new sources of production by the end of the decade are fields operated by a ConocoPhillips-led group; the U.K.'s Soco International Plc; the U.K.'s Premier Oil Plc; and Canada's Talisman Energy Inc.

ConocoPhillips Group

ConocoPhillips' group has discovered three additional fields at the area where it is already producing: Su Tu Vang, where the company has said it is targeting the first oil by 2008; and Su Tu Trang and Su Tu Nau, which are under appraisal.

Soco has been exploring two Vietnamese blocks. In December, the company said it had ``a major accumulation'' of oil at its block 16-1, while the company is targeting the beginning of production this year from an area known as block 9-2.

Premier said last month that drilling at its block 12E offshore of Vietnam was successful and that the company was beginning to evaluate reservoirs.

A recent sidetrack well that was drilled in the area has ``confirmed expectations of the extent of the hydrocarbon interval, and provided confidence for the development team to move rapidly into the project planning phase,'' Premier said, in a Jan. 25 stock exchange statement.

Talisman this month announced that it had tested 14,863 barrels of oil a day from a well at its block 15-2/01 off the Vietnamese coast. The Canadian explorer plans to drill three more wells in the area this year.

``These are great results from our first exploration well on the block,'' Talisman Chief Executive Jim Buckee said in a Jan. 17 statement. ``This block's shallow-water environment should allow us to move quickly and to manage development costs.''

To contact the reporters on this story: Jason Folkmanis and Nguyen Dieu Tu Uyen in Hanoi at 5130 or folkmanis@bloomberg.net or uyen1@bloomberg.net

Last Updated: January 29, 2007 03:48 EST