VietNamNet Bridge – The Vietnam Oil and Gas Group (PetroVietnam) faces many difficulties in operation and it operates inefficiently because of scattered investment in many third-grade firms, according to a government report.

PetroVietnam has retained the role of a powerful economic group, which has highly contributed to the state budget, the development of the oil and gas industry. However, the operation of Petrovietnam also indicates weaknesses which are pointed out in Document 309/TB-VPCP dated August 28, which announced the conclusion of Prime Minister Nguyen Tan Dung at a meeting on the project to restructure PetroVietnam.

According to this document, ineffective investment in its non-core businesses, problems associated with the group’s model and management mechanism and the establishment of many third-grade firms, have made it difficult for management and supervision of the owner and have made bad impacts on the general performance of PetroVietnam.

The Government requested that in September, PetroVietnam has to finalize its restructuring project to submit to the Ministry of Industry and Trade for evaluation and then to the Prime Minister for consideration and approval.

The project must report the production, business and finance situation of the group and its members, especially the difficulties and problems and offer solutions to deal with week members.

The group was asked to re-arrange its subsidiaries to focus on the five key business areas, to avoid duplication and internal competition.

For corporations, companies in which PetroVietnam holds 100 percent of stakes, member councils will not be held. The management structure of these companies will be the president and the CEO as one and the results must be reported to the Prime Minister in September.

In addition to the parent company - PetroVietnam, there are a number of corporations, subsidiaries of PetroVietnam which are in the model of one-member limited liability companies. Most of them have member councils and have two separate president and CEO.

PetroVietnam is also required to develop a roadmap to withdraw its capital from non-core businesses, such as securities, civil engineering, real estate and hotels.

In July 2012, Phung Dinh Thuc, Chairman of PetroVietnam, said that the group had about VND5,000 billion ($250 million) invested in its non-core businesses and the group had asked the government’s permission to not completely withdraw capital from two non-core business fields, including the PetroVietnam Finance Corporation (PVFC) because PVFC is really necessary to arrange capital for PetroVietnam. The group proposed to maintain at least 20 percent of its capital in PVFC.

However, the government document released on August 28 notes to not maintain PVFC and requires PetroVietnam to have solution to deal with this case under the law. Meanwhile, PVFC has proposed to the State Bank of Vietnam to switch its operating model into a bank.

The Ministry of Industry and Trade are tasked to coordinate with the Ministry of Finance and
PetroVietnam to propose a gas trading mechanism, including the relationship between the parent company - PetroVietnam with the Vietnam Gas Corporation (PV Gas) and the gas price plan based on the market to submit to the Prime Minister in September.

At the time of difficulties of the economy, PV Gas still tops the list of companies of good cash balance on the stock market, with nearly VND12,000 billion ($600 million) in cash and cash equivalents. Meanwhile, gas price is still a public concern when it has continuously increased.

Dau Tu