PVN’s dual crisis
The negative impacts of the Covid-19 pandemic have had direct consequences for all production sectors and business, with value chains seriously affected by the disruption of supply and demand of goods and raw materials.
Simultaneously, global oil prices plunged to a level unprecedented in the energy industry, severely affecting the production and business activities of many oil and gas enterprises around the world. With inventories piling up due to unsold products and investment projects frozen, many large international oil and gas groups have had to consider suspending production, cutting investments, reducing dividends, selling assets, closing oil fields, laying off workers, and even declaring bankruptcy.
The well-known oil producers like BP, Chevron, Royal Dutch Shell and Saudi Aramco or ExxonMobil have all decided to reduce investments by 20 to 30 percent. Or Total, one of the leading French oil and gas companies, has reduced investments by more than US$3 billion and will cut investments by around US$15 billion this year, equivalent to a 20 percent reduction, double its savings plans from EUR400 to 800 million and suspend plans to buy back shares.
In early April, the largest crude oil producer in North Dakota, the Whiting Oil Corporation with a turnover of more than US$2 billion per year, announced bankruptcy.
In Vietnam, too, many industries and sectors are suffering from the greatest difficulties they have ever faced. According to a report on 19 groups and corporations under the Commission for the Management of State Capital at Enterprises, in the first three months of 2020, their turnover declined nearly VND27.4 trillion; and the financial situation of seven out of the 19 corporations have become imbalanced, resulting in a total loss of more than VND3.7 trillion.
PVN, for its part, is suffering a dual crisis – both due to the curbs and effects of the Covid-19 pandemic and the global plunge in oil prices.
In response to these major difficulties, PVN has implemented short, medium, and long-term solution packages in administration, investment, finance, marketing and policy mechanisms to cope with the double crisis and mitigate losses.
In the first four months of 2020, all units of the group maintained a stable production pace and output reached and exceeded the set target. Specifically, the total four-month oil production output reached 7.2 million tonnes, exceeding the plan by 7.7 percent. It generated 7.03 billion kWh and produced 601,600 tonnes of fertilizer (7.8 percent higher than the target). It has also produced more than 4.53 million tonnes of petroleum, exceeding the target by 2.2 percent.
In addition to ensuring production and business activities, PVN and its member units focused on preventing the spread of the pandemic, putting in place security and prevention measures at construction sites and factories, which applied to external contractors, too.
Given the domestic and international constraints of recent months, the above results are remarkable, especially when the group has just emerged from the high oil price crisis lasting from mid-2015 to the end of 2018.
Speaking at a May 8 conference reviewing production and business activities in the first four months of 2020, General Director of PVN Le Manh Hung said the overall economy remains volatile, and there are many challenges to economic growth. Hung asked subsidiaries and affiliates to adjust their management approach to these market fluctuations for the rest of the year because the situation has become more serious than previously forecast.
Although Vietnam has effectively curbed the spread of the disease, PVN’s foreign partners are experiencing great hardships. “The imminent difficulties remain high, but with the efforts of the group and our member units, I believe that we can avoid further big waves,” General Director Hung said.
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