Vietnam: EVN makes bold promises

With ongoing electricity shortages across Vietnam in the last few years and lower than required investment and generation capacity development, Electricity Vietnam (EVN) has made the bold statement that it will increase generation by 16 per cent in 2011.

With many of its largest projects considerably delayed and an unusually dry rainy season in the north that will mean hydroelectric plants must operate well below capacity again, EVN is having to look north to China to fill the gap. Deputy CEO Duong Quang Thanh put it simply in interviews: “We will negotiate with China to increase our purchase of power as much as possible for the year.”

EVN has thus been forced to continue with its international bond issue and has asked the government to provide a guarantee of US$667 million. International investors have been reluctant to lend to Vietnam's economic groups, even performing and profitable ones such as PetroVietnam and Vinacomin, and they seem less than keen to put money into underperforming EVN.

EVN has continually failed to invest strategically in Vietnam's electricity generation and though some of this reluctance is due to the market pricing structure and a reliance on hydropower over other forms, its investment choices have also been questionable.

Over the last five years EVN has increasingly focused on non-core business elements, including a large telecom company, banking, real estate, and finance. While expanding into these areas the group handed back 13 coal-fired power stations it had been given the responsibility to build under the energy master plan.

EVN may be happy to take even a higher than normal yield in the international market as interest rates at home are now reaching 14 per cent for deposits and over 17–18 per cent for loans. The Vietnamese government may be seriously considering increasing the caps it maintains on electricity pricing to make the generation market more attractive to foreign and domestic investors alike. Until this happens it is unlikely that EVN will be able to attract adequate investment.

For more news and expert analysis about Vietnam, please see Vietnam Focus.


© 2010 Menas Associates

PetroVietnam starts gas output from offshore facility

PetroVietnam has begun gas production from its processing plant and pipeline network, based at its offshore Rong-Doi Moi oil fields. The gas compressing rig, in southern Vietnam, processed in the region of 960,000 cubic metres per day, which accounts for 4.3 per cent of the estimated daily output for this year. The field contains around 2.5 billion cubic metres of gas.

The gas unit is connected to the gas pipeline in the Rong-Doi Moi and White Tiger oil field through a RC-3 rig and five underwater pipelines totaling 43 kilometers. PetroVietnam and its subsidiary PVGas are partners in the project together with VietsovPetro, a joint venture of PetroVietnam and Russia state-owned oil and gas company Zarubezhneft.

VietsovPetro said the project will supply gas to power plants material production plats and household customers throughout Vietnam. The annual gas volume is estimated to cost around $56.5 million annually and is expected to cover the investment cost in eight years.

PetroVietnam has said that Rong-Doi Moi is one of several gas projects the company has been working on and that its subsidiary PVGas currently operates five gas pipeline networks, with annual capacity of 14 billion cubic metres. More projects are shedualed for competion by 2014.

Sources: VietNamNet, Platts

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Binh Son refinery signs sales deals with four oil companies

Binh Son refinery has signed contracts with four state owned oil companies for the sale of oil products commencing in 2011. Binh Son signed deals with Petrolimex, Vinapco and two of Petrovietnam's subsidiaries PV Oil and Petec Trading and Investment Corp.

The volume committed to the four companies totalled 4.7 million cubic meters, comprising of 92 RON and 95 RON gasoline, diesel, jet A-1 and fuel oil, accounting for about 81 per cent of Dung Quat refinery's planned output of petroleum products for next year.

The refinery's planned output for 2011 is 4.9 million cubic metres of which 4.6 million cubic are petroleum products. Of Binh Son's committed sales volume of 4.7 million cu m for 2011, Vinapco will take 200,000 cu m of jet A-1 while Petrolimex has contracted to buy 2 million cu m, half of which is 92 RON and 95 RON and the other half, diesel. PV Oil and Petec will lift 1.5 million cubic metres and 1 million cubic metres respectively.

Source: Platts

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TNK-BP and PetroVietnam sign blend oil supply agreement

TNK-BP has signed a long term co-operation agreement with PetroVietnam to supply Russian ESPO crude oil to Vietnam. The first shipment of 100,000 tonnes is expected to reach Hanoi in November 2010.

The ESPO oil blend will be supplied via the East Siberia – Pacific Ocean (ESPO) pipeline and loaded for export in the port of Kozmino, the oil comes from the Verkhnechonskoe field in the Irkutsk region. The agreement with PetroVietnam is part of TNK-BP's plan to develop and expand its trading operations on an international scale.

“The signing of this contract to supply oil to Vietnam is a first and important step towards broad-based cooperation between TNK-BP and PetroVietnam. We are committed to establishing a long-term presence in Vietnam and to pursuing joint projects in the upstream and refining sectors”, said TNK-BP's deputy chairman Maxim Barsky.

To find out more about TNK-BP please visit TNK-BP's web site, which you can find here.

For more news and expert analysis about Vietnam, please see Vietnam Focus.

© 2010 Menas Associates

PetroVietnam signs agreements with three foreign banks

PetroVietnam has signed agreements with three foreign banks to help limit risks when it conducts derivatives transactions. PetroVietnam signed the International Swap and Derivatives Association Master Agreement with Paribas, Sumitomo Mitsui Banking Corporation and Standard Chartered, announced the Vietnamese government on Thursday, 10th September.

Petrovietnam's Deputy Chief Executive Nguyen Tien Dung said that it would help the company Petrovietnam, "balance and limit changes, prevent risks of interest rates, exchange rates and prices of goods, and diversify the group's financial activities" and using derivatives transactions would help mitigate associated risks

PetroVietnam has been looking for funding for several large-scale projects, including two oil refineries. Dung did not elaborate further on other prospective projects.

Source: Reuters

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PetroVietnam and TNK-BP sign oil and gas MoU

PetroVietnam has signed a memorandum of understanding (MoU) on oil and gas co-operation with Russia's TNK-BP. The pact will enable the two countries to set up an exploration and production venture in Russia.

TNK-BP is expected to develop plans to expand Vietnam's Dung Quat oil refinery. The country's national press has said that Deputy Prime Minister, Hoang Trung Hai, has approved plans to raise the refinery's capacity to 10 million tonnes of crude oil a year, or 200,800 b/d, from the current of 6.5 million tonnes.

TNK-BP is also expected to supply crude oil to PetroVietnam, or its trading arm, PV Oil, once the two countries start co-operation.

Source: Dow Jones

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Vietnam receives first crude from Azerbaijan

First oil tanker, carrying crude oil from Azerbaijan, reached Vietnam's Thanh Bay on Wednesday 11th August. The crude will be refined in a Dung Quat oil refinery in the province of Quang Ngai.

It is the first consignemt of crude oil under a deal signed by the Vietnam oil and gas group, PetroVietnam, State Oil Company of Azerbaijan Republic (SOCAR) and the BP Group.

According to the agreement, SOCAR will supply Dung Quat refinery with 65,000 barrels of oil in the month of August, and BP will export the same volume of crude. The imported crude will be mixed with oil produced in the Bach Ho field in southern Vietnam during the refining process.

Source: Vietnam News

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Vietnam and Japan in talks about oil refinery projects

JX Holdings Inc, one of Japan's largest oil companies, has announced that it will work together with Vietnam's national oil and gas group, PetroVietnam, on two large-scale oil refinery projects, estimated to be worth a combined sum of ¥800 billion.

The two companies intend to set up operations, once they are given the go-ahead from the Vietnamese government. JX Holdings Inc will take part in PetroVietnam's expansion plans for their refinery in Dung Quat, expected to be completed in 2016. The work is estimated to cost in the region of ¥100 billion, and will increase refining capacity to about 170,000 b/d.

JX Holdings Inc will also collaborate with PetroVietnam on construction of another refinery in the southern province of Ba Ria-Vung Tau for operations in 2020. The estimated cost of construction is in the region of ¥700 billion yen, expected capacity of about 200,000 b/d. Once fully operational, the two refineries will produce gasoline and related products for the domestic market, with a possibility of exporting to other parts of Asia.

Earlier this year, chairman of JX Holdings Inc, Shinji Nishio, confirmed company plans to invest in Vietnam, when PetroVietnam's, chairman Dinh La Thang, was on a visit to Tokyo. The two companies are expected to set up a think-tank to discuss bilateral cooperation. The Japanese firm will provide technologies for refining oil products from low-grade crude oil at low cost, and will also environmental technologies.

Source: Vietnam Business News

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