However, U.S. companies did not begin investing until 1994, when the twenty-year U.S. trade embargo was lifted. Vietnam has tried to make the country more attractive to foreign investors by various reforms in its petroleum law. The country's first petroleum law was ratified in July 1993. This law assigns upstream and downstream petroleum operations to the state-owned enterprise, Petrovietnam, founded in 1977. It also gives the company the power to parcel acreage to select contractors based on competitive investment auctions or other government-announced programs.
Most foreign investments are in the form of production-sharing agreements or joint ventures.
Vietnam also is directing foreign investor activity toward the building of infrastructure to include refineries, gas pipelines, and hydrocarbon-fueled power plants. Unlike many former Communist economies in transition, where uncertainty is causing lengthy delays, Vietnam has established a stable legal and tax environment that reduces uncertainity and enables companies to quickly move from the initial stage of signing agreements to the stage of producing the fields. However, regional territorial disputes are an impediment to the development of some of Vietnam's offshore petroleum resources. Hydrocarbon potential off the Spratly Islands in the South China Sea and competition for additional energy reserves recently reignited a long-standing feud between China and Vietnam surrounding ownership of the Islands and adjacent waters. The territorial dispute arose again when China awarded an exploration block in the disputed waters to the U.S. independent oil company Crestone Energy Corporation.