Lack of energy is one of Vietnam's major obstacles to economic development. While coal output is substantial, most of it has been reserved for export. Until the late 1970s, the nation had no proved oil reserves, and hydroelectric power, while showing considerable potential, was poorly developed. Since the end of the war, the government has implemented a number of major projects to provide Vietnam with sufficient energy resources. Several hydroelectric power stations are currently under construction, and some are already in operation. In 2000, net electricity generation was 25.7 billion kWh, of which 40.7% came from fossil fuels and 59.3% from hydropower. In the same year, consumption of electricity totaled 24 billion kWh. Total installed capacity at the beginning of 2001 was 4.9 million kW.
In February 1975, during the time when the country was still divided into two separate nations (North Vietnam and South Vietnam) the Mobil Oil Company, a US firm, struck oil off the southern coast, producing an initial outflow of 2,400 barrels per day. By mid-April, however, US oil firms—which had invested some $100 million in oil exploration in South Vietnam—had left the country. In the mid-1970s, offshore oil was also discovered by Soviet geologists working the Gulf of Tonkin. In the late 1970s, Western firms abandoned their explorations because of unpromising results, but the USSR continued its efforts and by late 1984 had begun to achieve promising results. In September 1992, Vietnam demanded that China immediately withdraw all oil exploration ships from disputed waters in the Gulf of Tonkin. In April 1994, Mobil Corporation signed a production-sharing contract to explore for oil off the southern coast of Vietnam, becoming the first American company to drill in Vietnamese waters since 1975.
As of 2000, about 30 foreign companies had been awarded contracts to operate in the waters off the southeastern coast. Vietnam estimated that it would need about $5 billion in foreign investment in its oil sector during 1996–2000 in order to fully develop its petroleum resources. Proven oil reserves as of 1 January 2002 totaled 600 million barrels; production in 2000 amounted to 288,000 barrels per day. In 1999, exports of petroleum accounted for about $2 billion, or 22% of total exports. Natural gas is believed to exist throughout much of northern Vietnam; proved reserves in 2001 were 193 billion cu m (6.8 trillion cu ft). Production was 999.3 million cu m (35.2 billion cu ft) in 1999.
Control over the Spratly Islands remains a contentious issue between Vietnam, China, Taiwan, the Philippines, Brunei, and Malaysia. The reefs, many of which are partially submerged, lie atop an oil field containing an estimated 1–7 billion barrels of oil.