Oil giant under close scrutiny

Last week, the National Assembly  approved a government plan to finance the flagship group with VND3.5 trillion ($179.4 million), though the National Assembly  voting results showed that more than 50 per cent of deputies (200/398 votes) disagreed with the plan.

Investment into state-owned corporations including PetroVietnam brings mixed opinions when deciding on budget allocations.

According to the National Assembly  Standing Committee, the investment capital allocation to PetroVietnam is in line with the national petroleum development strategy until 2015 with a vision until 2025, under the prime minister’s Decision No386/QD-TTg dated March 9, 2006, and conclusions by the Politburo.

Accordingly, PetroVietnam is allowed to retain at least half of its profits gained from Vietsovpetro and petroleum contracts. PetroVietnam is allowed to use the capital for reinvestment following precedures under the Investment Law.

“A huge volume of investment capital is still needed for many substantial oil and gas projects under implementation. Thus, without further reinvestment, the oil and gas industry will face difficulties and the effectiveness of investment will be affected,” said National Assembly  vice chairman Nguyen Duc Kien.

However, the National Assembly’s Finance and Budget commitment chairman Phung Quoc Hien said that the projected $179.4 million allocation for PetroVietnam in 2011would only meet about half of the needed capital, which was estimated at between VND6-7 trillion ($307.6-$359 million).

Still, the National Assembly’s Standing Committee urged the government to ask PetroVietnam and relevant ministries to make detailed reports on the oil and gas group’s projects which had used state budget.

“The government also needs to intensify inspection and auditing of PetroVietnam to ensure proper capital use,” Kien said.

In late March this year, the prime minister requested PetroVietnam to make specific reports on its investment activities and capital use effectiveness, as well as its affiliates’ operation and investment effectiveness.

Recently, the standing committee trumpeted that the National Assembly  would put PetroVietnam under microscope in its supervision programme next year, due to big concerns over the operational and capital use of state-run groups and corporations’. It follows the recent Vinashin scandal which was found to have financial losses of at least VND86 trillion ($4.52 billion).

National Assembly  Office Chairman Tran Dinh Dan said PetroVietnam had used a huge chunk of state capital and had engaged in many sectors not belonging to its core sector, such as financing, insurance and real estate.

For example, a standing committee report stated that in 2008, it invested VND5.494 trillion ($305.2 million) in the finance sector, occupying 26 per cent of total money invested in this sector by Vietnam’s 90 state-run groups and corporations.

“The National Assembly’s supervision of PetroVietnam aims to answer the public’s doubts and concerns over how effectively state-owned capital has been used by this group,” Dan said.

“Supervision results will help us assess how the state-run economic sector is operating. Then more effective solutions will be taken to perfect relevant legal regulations,” he said.