Vietnam oil giants call for help amid oil price crash

The meeting to recap operations in 2014 of the state-run oil and gas behemoth PetroVietnam (PVN) in Hanoi was overshadowed by the gloomy picture of the oil industry, with insiders severely hurt by the price crash.

The PetroVietnam Exploration Production Corporation, a PVN subsidiary, has plans to cut contracts with its suppliers and ask them to reduce prices in signed contracts to deal with the situation, according to chairman Hoang Ngoc Dang.

“Oil prices keep falling and we need help to maintain our existence,” he lamented.

Dang admitted that PVEP is “no longer a financial giant as it was in the last few years.”

Nguyen Hoai Giang, chairman of the Binh Son Refining and Petrochemical Co. Ltd., which operates Vietnam’s sole refinery at Dung Quat, said the company is incurring losses due to the slumping oil prices.

Dung Quat Refinery, located in the central province of Quang Ngai, has to import crude oil for production, but “prices dropped even further when we released the processed products,” Giang said.

In November 2014, the company reported a VND237 billion (US$11.04 million) loss as oil fell to $85 a barrel, and the loss the following month was estimated at VND476 billion ($21.76 million), Son elaborated.

PVN general director Nguyen Quoc Khanh admitted that the company was still able to sell its oil at an average of $103 a barrel in 2014, as prices only began shrinking in the later half of the year.

But the falling oil prices from October have affected PVN operations and reduced its revenue, which Khanh said will also affect the company’s plan for 2015.

In 2014 PVN contributed VND178 trillion ($8.3 trillion) to the state budget, but the figure will drop to VND93.1 trillion if oil dips to $60 a barrel this year, Khanh noted.

“And our state budget contribution in 2015 will be only VND79.8 trillion, way below the 2014 figure, if oil falls further to $40 a barrel,” he said.

PVN chairman Nguyen Xuan Son thus ordered that the oil and gas sector try to save costs in 2015 to deal with the oil price crash.

“Businesses should also consider whether to continue exploring oil fields that have high production costs and only begin exploration when oil prices recover,” he said.

Speaking at the meeting, Deputy Prime Minister Hoang Trung Hai ordered that PVN take immediate measures to cope with the situation as oil prices are expected to remain low for the next two years.

The slumping oil prices are a huge challenge, but the country’s oil exploration cannot be reduced or slowed down, he said.

“PVN must have a solution to ensure the national energy security,” he urged.