Under the agreement, Santos will operate Block 101-100/04 in the Song Hong Basin, offshore Vietnam, holding a 55% interest in the venture.

Singapore Petroleum Company will own the remaining stake.

As part of the deal, Santos said the pair are required to process and interpret existing seismic data, acquire and process new 3D seismic, as well as drill one exploration well in the first three years of exploration.

Managing director John Ellice-Flint said he was pleased Santos was continuing to grow its exploration interests in Vietnam as part of its expansion in the Asia Pacific.

"Santos is very proud to have been given this opportunity to participate in Vietnamese oil and gas sector," Ellice-Flint said in a speech delivered in Hanoi on Friday night.

"I am confident that together we are in a strong position to make a substantial contribution to the further development of Vietnamese oil and gas sector."

He said the company's extension into the country would have the wider benefit of helping to promote energy security, which he described as an 'issue of increasing international concern and attention.'

"It is very pleasing to us at Santos that we are now working in partnership with Vietnam towards supporting positive domestic and regional energy outcomes," Ellice-Flint said.

"It is also important that we go about that ambition in an environmentally sensitive fashion."

Ellice-Flint said crude petroleum is the largest export item from Vietnam to Australia, amounting to over $US2.5 billion ($A3.3 billion) in 2005-06.

The move follows Santos' recent oil and gas discovery at Dua in Vietnam's Nam Con Son Basin.

As part of its global program, the company plans to drill over 250 wells in 2006 alone.

The new contract's term runs for 30 years, with an exploration period of at least seven years.