PetroVietnam continues to make important economic contributions despite COVID-19

PetroVietnam sets dual goals in dual crisis

In the first quarter and in April, the major economies of the world, including Vietnam, have been witnessing the direct consequences of the COVID-19 epidemic on all production sectors and business, with dire disruptions to the supply and demand of goods and raw materials.

Simultaneously, the price of oil has been dropping continuously, (on April 20, 2020, WTI oil price was at negative $37.6 per barrel). This has severely affected the production and business activities of many oil and gas enterprises in the world.

The economy remains volatile and there are many challenges to growth, according to PetroVietnam CEO Le Manh Hung

In response to these negative impacts, many large international oil and gas groups have to consider suspending production, cutting investments, reducing or calling off dividends, selling assets, closing oil fields, and lay off workers,and even declaring bankruptcy.

Large-scale oil producers such as BP, Chevron, Royal Dutch Shell, and Saudi Aramco, or ExxonMobil have all decided to reduce investments from 20 to 30 per cent.

Total, one of the leading French oil and gas companies, has reduced investments by more than $3 billion so far this year and will cut investments by a total of around $15 billion this year, equivalent to a 20 per cent reduction, and has doubled its savings target, from €400 to 800 million and suspend plans to buy back shares.

In the early days of April, the oil market was shocked when the largest crude oil producer in North Dakota, US – Whiting Oil Corporation with a turnover of more than $2 billion per year – has announced bankruptcy. Accordingly, Whiting will transfer 97 per cent of its shares to creditors to reduce its debt of $2.2 billion.

Meanwhile, many industries and sectors of the Vietnamese economy are suffering from the greatest difficulties they have faced throughout their history.

According to reports of PetroVietnam members, all current exploration and key exploitation projects have been affected by the COVID-19 epidemic.

PetroVietnam achieved a total output of 7.2 million tonnes of oil and gas in the first four months of 2020, exceeding its plan by 7.7 per cent

In the first months of 2020, although the output of most PetroVietnam fertiliser plants reached and exceeded the monthly plan, the consumption of urea and fertiliser was lower than expected as demand from the agricultural industry was low.

In terms of oil and gas technical services, similar difficulties are encountered when investors and contractors are tending to cut and optimise production costs.

The COVID-19 disease has caused a sharp drop of international freight rates for vessels of all sizes. The sharp drop in oil prices will also affect the price of drilling rigs when re-signing contracts as oil buyerswill request a re-negotiation of prices.

According to PetroVietnam’s calculations, if the price of crude oil was $60 per barrel, Vietnam would have a revenue of $4.67 billion. If the price dropped to a half of that, the turnover from selling crude oil was at $2.362 billion.

The company's contribution to the state budget, therefore, would reduce from $1.59 billion to $806 million. PetroVietnam would lose $2.3 billion in turnover.

Overcoming difficulties to achieve remarkable results

In face of its towering difficulties, PetroVietnam has drastically implemented short-, medium-, and long-term solution packages in each field of activity: administration, investment, finance, market and policy mechanism to cope with and mitigate losses.

With these efforts, in the first four months of 2020, all affiliates and subsidiaries of the group have kept production at a stable pace. Its output basically reached and even exceeded the target set before.

Specifically, PetroVietnam achieved a total output of 7.2 million tonnes of oil and gas in the first four months, exceeding the plan by 7.7 per cent. It has generated 7.03 billion kWh and 601,600 tonnes of fertiliser (7.8 per cent higher than the target). It has also produced more than 4.53 million tonnes of petroleum, exceeding the target by 2.2 per cent.

Nitrogen production reached 601,600 tonnes, exceeding the plan by 7.8 per cent. Petroleum production is estimated at 4.53 million tonnes, 2.2 per cent higher than the plan.

The consumption of petroleum products began to pick up in April 2020 with gasoline consumption increasing by 3.6-17.6 per cent against the previous month. This helped reduce inventories, although they are still relatively high.

Due to the serious impact of declining oil prices, the average oil price in these four months was about $48 per barrel. The total revenue of the group during the period was estimated at VND203.9 trillion ($8.87 billion), contributing an estimated VND24.1 trillion ($1.05 billion) to the state budget.

In addition to ensuring production and business activities, PVN and its subsidiaries have been focusing on actively responding to the COVID-19 pandemic.

According to PetroVietnam CEO Le Manh Hung, the overall economy remains volatile and there are many challenges to economic growth.

PetroVietnam continues to face many difficulties. Therefore, in May and the remaining months of the second quarter, Hung requested his subsidiaries and affiliates to adjust their management approach to the fluctuations of the market because the situation is more serious than previously forecast. On the other hand, Hung said there are opportunities for growth recovery so it is necessary to prepare conditions to quickly capture opportunities to resume growth in the coming time.

“The difficulties remain high, but with the efforts of the group and our member units, we can avoid further big negative impacts,” Hung emphasised.