Despite difficulties and challenges in the context of “dual crisis” from the Covid-19 pandemic and the decline in oil price, Vietnam National Oil and Gas Group (Petrovietnam) has recognized opportunities to consolidate the “formation”, ready for a new stage of development. The spirit of Petrovietnam is to achieve the “dual goal” in the “dual crisis”, that is to ensure effective prevention of epidemic as well as ensure production and business. This spirit has helped Petrovietnam withstand the “storm”.
The “dual goal” responds to the “dual crisis”
Under the negative effects of the Covid-19 epidemic, in the first quarter and April, many major economies in the world generally and Vietnam particularly have witnessed the direct consequences in all production and business sectors, when the value chains have been seriously affected by the disruption of supply and demand of goods and raw materials.
In addition, that oil price dropped continuously and lasted without precedent in the world energy industry (even on 20th April 2020, WTI oil price was negative 37.6 USD/ barrel) has severely affected production and business activities of many oil and gas enterprises in the world. Inventory increased due to unsold products, investment projects were “frozen” and even the risk of financial imbalance leading to bankruptcy…took place. In response to such negative impacts, many large international oil and gas enterprises had to consider the plans to suspend production, cut back investment, reduce or cut dividends, sell assets, close fields, reduce personnel… and even lay off workers, declare bankruptcy.
Overview of the meeting on 8th May
The world is “stormy” before the epidemic and the decline in oil price, and many industries and sectors of Vietnam’s economy are also suffering. According to the updated report of the Covid-19 impact on the production and business of 19 corporations under the State Capital Management Committee at the enterprise, in the first 3 months of 2020, the turnover of 19 corporations reduces about 27,376 billion VND; 7 out of 19 corporations begin to disproportionate revenue and expenditure; total loss is 3,728 billion VND.
Petrovietnam currently provides most of the key products of the economy as input materials for many other manufacturing sectors; Also, the industry is directly affected by the low oil price, thus the consequences of the “dual” impact on the oil and gas industry compared to many other industries are considered to be much heavier.
According to reports of Petrovietnam subsidiaries, the key projects on exploration and production are currently affected by the Covid-19 epidemic. Many contractors will not be able to mobilize personnel to carry out work on projects; progress of supplying materials and equipment to the project from the epidemic countries under blockade and isolation is also interrupted or delayed… Along with that, petrol stations and agents restrict import to wait for price decrease and discount of retail price in the market increases sharply compared to January 2020, seriously affecting the products of Dung Quat and Nghi Son Refinery Plants.
In the first months of 2020, although the output of most fertilizer products of Petrovietnam’s plants reaches and exceeds the monthly plan, the consumption of urea and NPK fertilizer does not come up to expectation because demand is still low in most areas of agricultural production.
In terms of oil and gas technical services, similar difficulties are encountered when investors and contractors tend to cut and optimize production costs. In the immediate future, the Covid-19 disease causes a sharp drop in the international freight rates for all vessel sizes. The sharp drop in oil prices will also affect the price of drilling rigs when re-signing the contract, the user will request re-negotiation of price…
When the consumption of petrochemical products, the efficiency of oil and gas production decreases sharply… the revenue from selling oil and contribution to the State budget from crude oil will also drop sharply when the planned price is 60 USD/ barrel. Specifically, if the price of oil is at 60 USD/ barrel, revenue from selling crude oil is 4.668 billion USD. But if the oil price drops to 30 USD/ barrel, the revenue from selling crude oil is only 2,362 billion USD. Contribution to the State budget will reduce from 1,594 billion USD to 806 million USD (Correspondingly, Petrovietnam has lost 2.3 billion USD in revenue and nearly 800 million USD contributed to the State budget).
Achieving impressive results
Identifying that difficulties and challenges are considerable, during the past time, with the motto of “Managing fluctuations, optimizing values, promoting consumption, making efforts to overcome difficulties, seizing opportunities and finishing safely”, the Group has drastically implemented short-term, medium-term and long-term solution packages in each field of activities: administration, investment, finance, market and policy mechanism to respond to and minimize losses in front of the “dual crisis”.
With the efforts, in the first 4 months of 2020, all units in the Group have kept the production pace; the production output has basically completed and exceeded the set target. Specifically, the total oil production of 4 months was 7.2 million tons, 7.7% exceeding the 4-month plan. Electricity production was 7.03 billion kWh. Fertilizer production was 601.6 thousand tons, 7.8% exceeding the 4-month plan. Petroleum production was estimated at 4.53 million tons, 2.2% exceeding the 4-month plan.
The consumption of petroleum products in April 2020 began to flourish, gasoline consumption output of BSR and PVNDB increased by 3.6-17.6% over the previous month. It made the inventory of products in April tend to decrease compared to March, but still relatively high.
Due to the impact of serious decline in oil price, the average oil price in 4 months was about 48 USD/ barrel. Total revenue of the Group in 4 months was estimated at 203.9 trillion dong, and contribution to the State budget in 4 months was estimated at 24.1 trillion dong.
In addition to ensuring production and business activities, Petrovietnam and its units have focused and actively responded to the Covid-19 pandemic. The safety, security and prevention of the Covid-19 pandemic at the units, construction sites and plants have been carried out seriously and effectively by petroleum contractors and units.
Clearly, in the context of the general difficulties of the world economy, the international oil market as well as the domestic economy, the above results are very remarkable. And certainly, without the initiative and flexibility in proposing and deploying the above solutions, Petrovietnam will not be able to stand firm and achieve such results, especially when the Group has just experienced a “crisis” of oil price lasting from mid-2015 to the end of 2018.
Vietsovpetro workers on the platform
Speaking at the meeting on 8th May with the General Director/ Directors of units/ projects on the production and business activities in the first 4 months of 2020, Petrovietnam President and CEO Le Manh Hung said the macro-economic situation was still volatile, many factors related to the growth motivation were still challenging. Petrovietnam continues to face many difficulties. Therefore, in May and the remaining months of the second quarter, the President suggests the units change their management way to be more suitable to the fluctuations because the situation is more serious than previously forecasted. On the other hand, assessment shows that there are opportunities for growth recovery, so it is necessary to prepare conditions to quickly capture opportunities.
Up to now, although the epidemic situation in the country has been somewhat controlled, there are still many risks to Petrovietnam’s foreign partners, so the units should be aware of the prevention of epidemics to minimize the impact of the disease on the operation of the projects.
“The immediate difficulties are still great, but with the efforts of the Group and its subsidiaries, I believe that, despite difficulties, with the efforts of the whole team, we will avoid “big waves” ”, emphasized President Le Manh Hung.