Petrolimex defends itself from profiteering claims

Petrolimex CEO Bui Ngoc Bao claims its losses in the first nine months of this year would be covered
by the government

>> Petrolimex ‘suddenly’ makes profit prior to IPO

According to Petrolimex CEO Bui Ngoc Bao, the petrol trading mechanism, which involves a government supported price stabilisation mechanism has yet to fully operate based on market rules. Different types of enterprises participating in the government’s programmes to stabilise the domestic petrol market had complicated the calculation of the company’s profits.

Public concern had been raised after Petrolimex announced mammoth profits prior to its initial public offering; despite the firm claiming that it shouldering taking huge losses.

Addressing the issue, Bao said, “Crude oil prices on the world market rocketed to $147 per barrel on July 21, 2008 and gradually fell to $33 per barrel by the end of that year, causing a loss of VND10.775 trillion ($521.28 million) in oil trading during the first seven months of 2008. However, all the losses were then covered by the government.”

The company also incurred losses in petrol trading during that seven-month period but became profitable during the last months of 2008. Petrolimex was granted VND1.812 trillion ($87.66 million) in credit from the government when engaged in petrol trading which it had repaid gradually, he noted.

From July 21 through until the end of 2008, Petrolimex made a net profit of VND642 billion ($31 million) from petrol trading. Yet its real profit was only VND233 billion ($11.27 million) after returning VND409 billion ($19.78 million) to the state budget.

Petrolimex’s 2009 profit stood at VND1.257 trillion ($60.81 million) after returning the remaining VND1.403 trillion ($67.87 million) to the government, he explained.

Bao said that last year, Petrolimex made VND172 billion ($8.32 million) in profits from petrol trading which was primarily covered by profits from other business activities.

The company estimates its losses at VND1.22 trillion ($59 million) during the first nine months of this year, but this loss will be covered by the Ministry of Finance. Petrolimex expects its profit to reach VND598 billion ($28.93 million) in the fourth quarter of 2011.

However, Nguyen Tien Thoa, director of the Ministry of Finance’s Price Management Department said at a press conference on July 24 that the government had not covered the losses faced by petroleum companies, but only regulated petrol trading via taxes to ensure profits and consumer benefits.

This means that Petrolimex’s estimated losses of VND1.22 trillion ($59 million) between January and September of 2011 will not be covered by the government and its profits in the following years remain vague.

Nguyen Tien Thoa, director of the Ministry of Finance’s Price Management Department has refuted
Petrolimex’s claim