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Vietnam Energy Forum

PVN sets the target for "stable development" even when oil price falling to 30 USD / barrel

 - At the Party Congress of the Vietnam Oil and Gas Group (PVN) in 2020-2025 term, on June 9,2020, in Hanoi, Mr. Le Manh Hung - PVN General Director proposed a target to decrease average cost of the crude oil exploitation for being able to stand steady (even if the crude oil price falling to 30 USD / barrel).


Speaking at the Congress, Mr. Le Manh Hung said: In the period of 2015-2020, PVN faced many difficulties, especially in petroleum exploration and exploitation. So as in detail, at the end of 2015 and beginning of 2016, the crude oil price was only 30 USD / barrel and by the end of 2019, it fell below 40 USD / barrel.

At the present,  PVN is facing two great risks:

Firstly, the reserve increasing factor to compensate exploited production is at an alarming level (0.54 times) due to the investment in search for and exploration was only about USD 400-500 million as decreased 5 times compared to before, while in 2011 - 2015 this factor was at the safe level for sustainable development as 1.5 times.

Secondly: Although PVN has relatively controlled costs, but in 21 exploitation fields (14 oil fields and 7 gas fields), there are 5 fields such as Song Doc, Dai Hung, THang Long-Dong Do, Ruby and Chim Sao with a head well exploitation cost (UPC).still higher than 25 USD/barrel. With the production of these 5 fields, the average exploitation cost of PVN should be affected when the world crude oil price falls below 30 USD/ barrel.

According to the analysis of experts of the Vietnam Petroleum Institute, the decline in oil prices during the beginning of 2020 has greatly affected the turnover and efficiency of PVN and its subsidiaries at different levels. With oil price at 30 USD / barrel, the turnover of PVN will decrease by about 55 trillion dong/year (compared to planned oil price of 60 USD/ barrel), contributing to the budget reduction of about 18.6 trillion dong/year.

With the motto "Managing fluctuations, optimizing values, promoting sale, trying the best to overcome difficulties, catching  opportunities and safe finishing", PVN has actively researched and assessed the impact of oil price fluctuation for developing and synchronous deploying the short-term, medium-term and long-term solutions on management, investment, finance, market and policy mechanisms to cope with and minimize losses in "double crisis".

1/ Solutions on management: PVN will focus on steering production and business, maximal reducing production and business costs (at least by 15%), reducing salaries (by 10 - 20%), reducing meetings…strengthening  management of optimal costs, deploying the application of tools and measures to reduce costs, save time and improve labor productivity.

2/ Solutions on finance: Assessing the impact of cash flow, having plans to limit impacts and take advantage of optimal opportunities, restructuring capital sources, reducing costs of capital,  loan interest, mobilizing  loan capital;

strengthening management of debt collection, debt restructuring and negotiation for interest adjustment ...

3/ Solutions on investment: Updating, evaluating and classifying priority projects;  parting investment, adjusting reasonable progress; suspending not really important projects;  is not really important; strengthening control over contracts; looking for opportunity to buy fields with taking advantage of low oil prices ...

4 /Solutions on market: Following close behind the supply-demand development, crude oil and product prices in order to have a timely solution; diversify distribution channels, increase retail market share; building flexible selling policies; expanding and integrating the distribution system to share and reduce costs; strengthening cooperation with the domestic enterprises having business lines related to the products supplied by PVN units; asking the Government, ministries and agencies to consider the directions for supply-demand balance, encouraging domestic production and handling commercial frauds...

5/ Solutions on policies and mechanisms:

Proposing the Government and ministries and agencies to consider amending a number of the tax policies to help solve difficulties ...

As a result, in the first 4 months of 2020, all of PVN units maintained the rate of production and their production basically exceeded the set plan.

In detail, the total oil and gas exploitation production was 7.2 million tons of oil equivalent (exceeding the plan by 7.7%), electricity generation - 7.03 billion kWh, nitrogen production - 601.6 thousand tons (exceeded plan by 7.8%), gasoline production -  4.53 million tons ( exceeded the plan by 2.2%) The total turnover of PVN was about 203.9 trillion dong, contributing 24.1 trillion dong to the state budget.

In remaining months, PVN requires its units to continue changing management styles to adapt to market fluctuations, well prepare conditions and the most rapidly catch opportunities for the growth recovery.



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