PetroVietnam profits hugely on government monopoly

Thanh Nien News

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Engineers at Vietnam's sole oil refinery Dung Quat in central Vietnam. Photo credit: Tuoi Tre Engineers at Vietnam's sole oil refinery Dung Quat in central Vietnam. Photo credit: Tuoi Tre

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State-owned fuel giant PetroVietnam has reported more than US$1.1 billion in profit during the first-half of the year, thanks mostly to gains in sectors where it faces no competitors or enjoys preferential policies.
During a recent press briefing that coincided with the release of a financial report at its headquarters in the southern beach town of Vung Tau, the company announced VND23.6 trillion ($1.11 million) in profits --19 percent beyond its target, Tuoi Tre reported.
Major members of the state-owned group like Binh Son, which manages the country’s sole oil refinery (Dung Quat) in the central province of Quang Ngai, reported higher-than-expected profits.
Dung Quat has enjoyed steady profits ever since the government allowed Binh Son to begin levying a 7 percent import tariff on petroleum produced there in the middle of 2012, despite the fact that the refinery mostly processes domestic petroleum products; only 10-20 percent of crude oil it uses is imported.
The company was also allowed to raise the price of its liquefied petroleum gas (by five percent) and its petrochemical products (by three percent).
Binh Son needed the help. The company managed to report a VND2.2 trillion loss in the first half of 2012.
Following the implementation of special policies, its fortunes reverse.
Binh Son reported VND2 trillion in profits the following year and raked in VND2.08 trillion (nearly $98 million) during the first half of this year, more than double its target, despite service suspensions for maintenance.
PV Gas, officially known as PetroVietnam Gas Corporation, profited more than VND6.4 trillion ($301.62 million), after-taxes, in the first half of the year--overshooting its target by 50 percent.
The company also reported paying an average monthly salary of VND27 million ($1,270) per person. Vietnam’s per capita income in 2013 was US$1,911 according to the World Bank.
Profits of hundreds of millions of dollars were also reported by the exploration arm PVEP, PVDrilling and Vietnam-Russia oil venture VietsovPetro.
But on the flip side, ventures outside its core business haven't turned out well for PetroVietnam.
PetroVietnam Construction JSC lost VND433.8 billion on the stock market during 2013 and the first half of this year.
The company issued statements admitting to failures of management in the previous year but blamed the stagnant property market for its shoddy 2014 performance.
PetroVietnam Engineering Consultancy JSC (PVEIC) and PetroVietnam Insurance (PVI) JSC meanwhile reported slim profits.
PVI made VND93 billion during the first half of this year, a profit equivalent to that reported by a healthy medium-sized private firm; however, its return on equity ratio fell below 3 percent.
Nguyen Son from the Institute of World Economics and Politics said a private firm would likely go bankrupt after two years of losses, but in the case of state-funded firms, the government is left to fix their problems.
Son warned that there should be a greater sense of urgency about discovering the source of these problems.
Representatives of the loss-makers blamed the losses on issues beyond their control when approached by a Tuoi Tre reporter.
One PetroVietnam Insurance rep said its return-on-equity was low because its equity had increased.
PetroVietnam Engineering Consultancy sources, meanwhile, said prices have been low and there hasn't been much work to do.

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