Competition in the local retail petroleum market has stiffened with the involvement of foreign investors. Bui Ngoc Bao, chairman of Vietnam National Petroleum Group, discussed the firm’s plans to expand its future operations and undergo state stake divestments with VIR’s Bich Thuy.

A filling station of Petrolimex

In 2016, Japan’s JX Nippon Oil and Energy acquired an 8 per cent stake in Vietnam National Petroleum Group (Petrolimex). What are the firm’s main changes since having the foreign strategic partner?

JX Nippon Oil and Energy is a leading group in Japan with 100 years of experience. We have improved our business governance by increasing transparency and operational efficiency and minimising risks. Our operational standards have been internationalised.

Specifically, the business plan for three years has been built alongside the traditional five-year plan, which enables us to achieve our targets of cutting operational costs by 5-10 per cent a year and increase the sales volume by 3.5 per cent annually.

For example, in the first nine months of this year, the sales volume rose 7 per cent on-year, thus fulfilling 76 per cent of the group’s sales target.

Our business results have also improved a lot. As of December 31, 2016, Petrolimex’s total assets reached VND54.2 trillion ($2.46 billion). Its consolidated net revenue in 2016 was VND123 trillion ($5.59 billion), and pre-tax profits reached VND6.3 trillion ($286.36 million), up 68 per cent on-year.

In the first nine months of this year, PLX posted total consolidated net revenues of nearly VND112.43 trillion ($5.11 billion), up 27.7 per cent on-year, while total consolidated pre-tax profit reached VND3.55 trillion ($161.36 million), meeting 75.7 per cent of the whole-year target. With the result, our profit and revenue this year will surpass the targets.  

Under Decision No.1232/QD-TTg, Petrolimex will divest 24.9 per cent of its state-held stake in 2018 to reduce state holdings to 53.7 per cent. Do you have plans to attract more foreign strategic partners? How can Petrolimex realise this plan?

We welcome influential and capable foreign investors. We already have JX Nippon Oil and Energy as a foreign strategic partner that is interested in strengthening its position in our company.

We are planning to issue more shares to reduce the state’s holding, buy stake in existing oil refineries in Vietnam or abroad, or invest in new projects. We are considering the efficiency of such actions before making any final decision.

We have two mammoth projects. The first is the over $7 billion South Van Phong oil refinery project. We and JX Nippon Oil and Energy have finished the feasibility study and are seeking governmental approval for investment incentives. We want the project to be treated similarly to others of comparable size and scope in the country.

We are also preparing to develop a liquefied natural gas (LNG) project to serve power projects. We are studying a location in the Mekong Delta province of Tien Giang, which has a huge demand for LNG – in the millions of tonnes. JX Nippon Oil and Energy is also interested in this project.

State-run Electricity of Vietnam is also proposing the government to shift to this fuel for new power projects. We will build more LNG plants when market demands increase. In addition, using clean fuels has become more popular in Vietnam and is set to become even more trendy in the future. Thus, we are focusing on developing clean fuel.

As planned, important investment decisions will be made for the two projects in 2018. With these two projects, we are able to achieve the state divestment target.

The participation of a Japanese giant in opening the first foreign-owned petrol station in Hanoi has opened the door to mounting competition. What is Petrolimex focusing on in terms of future business operations to retain its position as Vietnam’s biggest petroleum retailer?

We now hold nearly 50 per cent market share. Petrolimex now has 2,400 petrol stations and opens 70-100 new ones every year, which enables us to compete with any domestic or foreign rival at any level.

We are co-operating with powerful domestic groups, including Vietnam Railways, to expand our petroleum station network.

For overseas activities, we have been operating well in Singapore, Laos, and Cambodia. Sales in Singapore account for 15 per cent of the group’s total sales volume. In Laos, we focus on retail sales, while in Cambodia, we lean more towards wholesale transactions.

We are also considering overseas expansion into Myanmar. We are negotiating with a partner in Myanmar to capitalise on this growing market.

VIR