VIETNAM may take a smaller cut of the oil produced from one of its first on-stream wells in order to avoid a showdown with Australia's Broken Hill Proprietary (BHP). The head of state oil monopoly PetroVietnam hinted yesterday that new lower estimates of BHP's Dai Hung field were being studied. 'If the reserves are not as big . . . both sides will negotiate to adjust the share,' PetroVietnam general director Ho Si Thoang said in reports in Vietnam's state press. The comment comes one month after the South China Morning Post revealed that BHP would shut the field down in April next year unless PetroVietnam agreed to take a smaller cut under its production sharing contract. Such a move could swiftly affect the country's foreign exchange earnings. Crude oil is by far Vietnam's biggest export. BHP has yet to comment officially. But company sources last night said talks were progressing well although final solutions were still some way off. BHP had been seeking a revision of the contract, as it believes the field holds far less oil than previously thought. Production started in October last year, with oil flowing at about 35,000 barrels per day, but the flow has since dropped to less than half that. Over the past few weeks the company has told PetroVietnam that it was not viable to look for more oil. Sources said the company now believed the field held less than half of the 750 million barrel estimate used when, with considerable fanfare, BHP committed itself to the deal in April 1993. The signing was based on two-dimensional data that was revised after PetroVietnam provided more advanced three-dimensional information. PetroVietnam has yet to approve the latest estimate. Up until recently, it had told the company that, rather than re-negotiate, it should drill more wells. PetroVietnam has signed 29 production sharing contracts with foreign oil companies, but this is the first time it has faced renegotiation. It recently announced that exports were expected this year to reach 7.7 million tonnes, mostly produced from two fields operated by VietSovPetro, its joint venture with the former Soviet Union. Mr Thoang said Hanoi was close to selecting a replacement for French oil giant Total in the construction of its first oil refinery. Total pulled out of a consortium with Taiwanese concerns China Petroleum Corp and the Chinese Industrial Petroleum Corp, claiming politics was interfering in the site selection. Prime Minister Vo Van Kiet has decided on Dung Quat in the impoverished centre of Vietnam. It won out ahead of a site in the richer south that would have been closer to the oil fields.