Adjustments needed for oil and gas sector to overcome hardships

An oil rig of PVN (Photo: Reporter/Vietnam+)

Hanoi, (VNA) - PVN has recently proposed plans to make strategic adjustments to support Vietnam's petroleum industry to overcome this difficult period.

Gloomy background

Assessing the impact of COVID-19 on the world oil and gas market, Goldman Sachs Bank forecasts that global oil demand in 2020 will decrease by record 1.1 million barrels a day.

At home, under the impact of COVID-19 epidemic and plummeting oil prices, many industries have been facing difficulties. The oil and gas, which is considered the economy’s key sector, is hardest hit by the plunging oil price and the global health crisis, when the consumption of petrochemical products sharply decreases and the revenue failed to meet exploitation costs.

PVN said that its revenue from selling oil and State budget contribution from crude oil would also drop sharply as it earlier planned crude price of 60 USD/barrel.

Specifically, if the price of oil is at 60 USD/barrel, the sale of crude oil is 4.668 billion USD. But if the price of oil drops to 30 USD/barrel, its revenue from selling crude oil is only 2.362 billion USD. State budget payment will also decrease from 1.594 billion USD to 806 million USD. This means that PVN will lose 2.3 billion USD in revenue and its tax payment will fall by nearly 800 million USD.

Impacts on oil and gas industry

It can be said that the operations of the Vietnam Oil and Gas Group have all been strongly affected by the COVID-19 epidemic, including key projects on prospecting, exploration and production.

According to a representative of PVN, oil and gas production in the context of low oil price is an obviously economical loss, and advantages from low-price petrol imports cannot compensate. While big exporters like the US considers plans to increase the import of low-priced crude oil for reservation, Vietnam needs to think twice about maintaining its output.

PVN workers on oil rigs (Photo: Reporter/Vietnam+)

In addition, the pandemic had caused a sharp decrease in transportation demand, leading to a decrease in domestic gasoline consumption, seriously affecting the production of the Dung Quat and Nghi Son oil refineries.

Currently, inventory at Nghi Son are very high, accounting for about 70%-85% of their storage capacity, and is expected to be fully filled by the end of this month. Inventory at Dung Quat is also rising fast, as customers delay receiving cargoes.
PetroVietnam's oil product business is projected to face more difficulties if the COVID-19 is not controlled in coming months, the official said.

Drastic response

In recent days, PetroVietnam's President and CEO Le Manh Hung chaired extraordinary meetings via video conferencing with production and business member units to cope with price decline and the Covid-19 epidemic.

Load-out ceremony of MLJ3 Topsides (Photo: Reporter/Vietnam+)

Hung told the Group leaders, officers and subsidiaries to raise their awareness and responsibility in every action to cope with the Covid-19 and the competition for oil market share that is happening very complicatedly and unpredictably.

The Group and its units are currently deploying a comprehensive solution package to manage production and business activities during the Covid-19 epidemic period in a safe manner and without interruption. The group’s member units are focusing on reviewing the work, strengthening governance, implementing solutions to reduce costs and research, proposing solutions to remove difficulties and offering scenarios to cope with each situation of oil prices./.