PetroVietnamgiant SOE and notorious loss-making business

19-Mar-2019 Intellasia | Hanoi Times | 6:00 AM Print This Post

PetroVietnam has dozens of loss-making projects abroad and many senior officials in jail.

Vietnam National Oil and Gas Group (PetroVietnam-PVN), one of the biggest state-owned enterprises in the country of nearly 100 million people, is known for both contributions to the economy and notorious loss-making operations.

According to the government’s Decree 07/2018/ND-CP, PVN specialises in (1) searching, exploring, and exploiting oil and gas; (2) gas industry; (3) power industry; (4) processing, storage, and distribution of petroleum products; (5) petroleum services, petrochemical development, and refinery to be a dynamic and strong financial enterprise with high competitiveness, contributing to national development and defense.

PVN has a registered capital of VND281.5 trillion (US$12.24 billion) with two subsidiaries, 14 members in which it holds stakes of more than 51 percent, five companies with less than 51 percent stakes, 12 project management boards and branches, two representative offices, one institute, one university, and one vocational training school.

Loss-making projects

The Tuoi Tre newspaper reported that PVN has 13 overseas investment projects with only two making a profit namely Nhenhexky in Russia (with an investment of $533.2 million) and one in Algeria (with an investment of $1.26 billion).

The remaining 11 projects are in troubles including those already shutdown, causing big losses, the Thanh Nien newspaper reported.

In Venezuela: PVN incurred a loss worth $500 million by investing in Junin 2 oil field from 2010. The newspaper reported that the project cost an investment of $1.82 billion.

In Peru: in 2012, PVN approved PVEP’s investment project via buying a 52.6 percent stake at Perenco Peru Limited’s PPL Bahamas for $647.4 million. Currently, the project is believed to face capital loss. The unallocated costs are estimated to hit $514 million. PVEP, which stands for PetroVietnam Exploration Production Corporation, is an upstream arm of PVN.

In late 2011, PVN approved PVEP’s investment project in Block 39 in Peru with a total investment of $323.6 million. As of 2017, PVEP had invested $75.5 million in this project. Currently, the project is suspended and PVEP plans to transfer above projects.

In Congo: PVEP invested more than $30.3 million in Block Marine XI following the investment approval in 2009.

In Myanmar: PVEP invested in Block M2 at the end of 2008 but it was then unable to finish the project as the investor failed to pay enough tax to the host country, owed contractors, and unable to finish the project after the deadline, according to Thanh Nien.

In Malaysia: in 2017, PVEP decided to raise investment to $292.2 million in Block SK305. The project has been warned of inefficiency by domestic agencies.

In Vietnam: besides a series of troubled projects abroad, PVN has bogged down in five big projects domestically with millions of dollars each.

Dinh Vu Polyester project in the northern city of Hai Phong cost an investment of VND7 trillion (US$304 million), suffers a loss worth VND1.7 trillion (US$74 million) and is now stalled. Dung Quat Shipbuilding Industry Company Ltd was transferred to PVN in 2010 from debt-ridden Vinashin.

Dung Quat Ethanol Plant in the central province of Quang Ngai (with an investment of VND1.9 trillion or $83 million), Phu Tho Ethanol Plant (VND2.4 trillion), and Binh Phuoc Ethanol Plant (US$81 million) are either unfinished or suspended due to inefficient operations, according to Thanh Nien.

The online Nong Thon Ngay Nay newspaper reported another long-stalled project: Thai Binh 2 Thermal Power in the northern province of Thai Binh has consumed an investment of VND41 trillion (US$1.78 billion). Kicked off in 2010, it is expected to put into operation in 2017. So far, the plant remains under construction.

PVN also lost VND800 billion (US$36 million) when it invested in OceanBank, which is struggling with bad debts.


Category: Business, Vietnam

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