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2 The making of Vietnam's oil
giant By Andrew Symon
HO CHI MINH CITY - PetroVietnam, Vietnam's
dominant state oil-and-gas group, is bidding to
emerge as a new force in international energy
markets. Following the proven model of China's
successful state-owned petroleum companies, CNOOC,
CNPC-PetroChina and Sinopec, and with an eye on
Malaysia's highly profitable state-owned Petronas,
PetroVietnam is leveraging off its strong domestic
position to develop a growing international
portfolio of energy interests and operations.
Crude-oil exports have powered Vietnam's
recent rapid economic
growth, representing the
country's largest single export item. Yet oil
production has been declining over the past two
years, forcing the government to open new acreage
to foreign exploration. Yet government planners
have a broader energy strategy, of which
PetroVietnam's international performance is
crucial to the mix. The energy concern has
budgeted US$6.7 billion for both new domestic and
overseas exploration over 2006-10 and a further
$9.7 billion for 2011-15.
In June and
July, PetroVietnam took up blocks in Cuba and Peru
and is bidding to take positions this year in
Nigeria and Kazakhstan. The state concern has
already built up minority and operating upstream
interests in Algeria, Iraq, Madagascar, Venezuela
and Mongolia, as well as Indonesia and Malaysia,
where it first ventured overseas in 1998.
With the group building Vietnam's first
oil refinery at Dung Quat on its central coast,
the potential to supply downstream refined fuels
for regional markets as well as the domestic
market is fast emerging. Dung Quat, a $2.5
billion, 130,000-barrels-per-day project, is due
to come on stream by early 2009, while two other
refineries where PetroVietnam has interests are
also under development.
Underpinning
PetroVietnam's international and regional
ambitions is a dominant, if not monopoly, position
in all segments of Vietnam's petroleum industry -
upstream, midstream and downstream gas and oil -
along with its dual role as government regulator.
Established in 1975 and now with more than 30
subsidiaries and association companies,
PetroVietnam is by far Vietnam's most profitable
state-owned company, with annual revenues of about
$9 billion and serving as the country's largest
taxpayer.
In Vietnam's emerging gas-supply
industry, PetroVietnam acts as both gas aggregator
and pipeline operator. In downstream retail fuel
distribution, there is a little more competition
with other state-owned companies, some tied into
ventures with foreign companies. PetroVietnam has
recently extended to the country's embryonic
petrochemical industry and is now producing
fertilizer.
Power generation is another
area where PetroVietnam sees itself as not only a
local player but an emerging force in the wider
Mekong region. The company operates a new
700-megawatt gas-and-oil-fueled power plant at Cau
Mau, at the country's southern tip, and it
recently formed a partnership with the state
utility Electricity Vietnam (EVN) for power-plant
development in neighboring Cambodia and Laos.
Its growing ventures into power production
are a mark of its fully integrated ambitions, as
most of the world's leading petroleum companies
tend to view electricity as an only marginal
business. At the same time, the scale of Vietnam's
power needs are huge, with the latest government
master plan calling for a rapid and colossal
increase in installed generation capacity, rising
from the current 12,000MW to 51,000MW by 2015. If
accomplished, that expansion will at today's
prices mean about $60 billion in capital costs
alone for the new power plants.
The
government is encouraging state-owned entities
such as PetroVietnam and the coal and minerals
group Vinacomin to take on the role of power
producers to help EVN meet those goals. Foreign
power producers are also being sought, but the
government still prefers that wherever possible,
local entities are at the core of development and
operation and maintain majority control in
perceived strategic economic sectors.
Market-driven overhaul Like
China, Vietnam aims to temper its reliance on
foreign majority-controlled companies to drive its
industrial development. As a result, the
government is pushing reform and modernization of
several large state-owned companies, including
PetroVietnam.
They are being encouraged -
again similar to China - to secure foreign capital
through stocks and bonds raised via the local and
fast-growing stock market. Several of its
subsidiary companies are listed on the local
bourse, including its fertilizer and chemical
arms, and overseas listings have been mooted.
Hanoi is now bidding to re-gear its
various state enterprises into market-oriented,
internationally competitive firms, and
PetroVietnam is at the forefront of the
government's plans. Its revenues are large by
international standards because of Vietnam's large
upstream production and high oil prices, and a
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