Exploiting 1 million tons of oil not an easy task for PetroVietnam

Exploiting 1 million tons of oil not an easy task for PetroVietnam

In early June, Deputy PM Trinh Dinh Dung had a meeting with state-owned
large economic groups to discuss solutions to stimulate economic growth
after low GDP growth rate of 5.1 percent in Q1 & Q2, attributed to a decline
in the mining industry.

At the meeting, Dung asked the national oil & gas group PetroVietnam to
exploit one million more tons of crude oil and 1 billion cubic meters of gas
than initially planned to help obtain the yearly GDP growth rate of 6.7
percent.

Vinacomin, the national coal miner, was also asked to build up the coal
exploitation plan so as to ensure enough coal for domestic thermal power
plants.

Chair of the Vietnam Petroleum Association (VPA) Ngo Thuong San commented
that the task was difficult as PetroVietnam would have only six months to do
so.

PetroVietnam has been asked to exploit more oil to obtain the targeted
growth rate of 6.7 per cent assigned by the government.
Meanwhile, from June onwards, the south will enter the choppy sea season
with northeast monsoon, which makes it difficult to step up construction of
work on the sea and put new oil fields into exploitation.

San said that the peak period of large oil fields such as White Tiger, Lion
and Rhino is over and they are on the decline.

PetroVietnam will have to thoroughly consider economic and technical
solutions to increase the output.

The small oil fields will not provide significant output. When the oil price
is at low level, joint ventures will not be enthusiastic in increasing the
exploitation output, because the more they produce, the bigger losses they
would incur.

Moreover, the oil and gas industry is undergoing restructuring while it is
facing big financial difficulties due to the prolonged oil price decreases.

Therefore, it would find it difficult to ensure capital flow to put new oil
fields into exploitation.

Sharing the same view with San, Le Xuan Sang, deputy head of the Vietnam
Economics Institute, said it was necessary to consider the exploitation
cost. If the exploitation brings losses, it is necessary to reconsider the
exploitation plan and not try to exploit more for GDP growth.

Because of the difficulties, energy experts said the state and ministries
need to create a special mechanism for PetroVietnam to help it arrange
capital to fulfill the task.

With the oil price of $50 per barrel, 1 million tons of oil at present would
be worth $350 million, making up 0.3 percent of GDP. Meanwhile, 1 billion
cubic meters of gas would make up 0.2 percent of GDP.

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Link to Original Article:
http://english.vietnamnet.vn/fms/business/181337/exploiting-1-million-tons-o
f-oil-not-an-easy-task-for-petrovietnam.html

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com