Striving for Better Oil, Gas Services

Exporting crude oil is the largest forex earner of the Vietnam National Oil and Gas Group (PetroVietnam). However, at present, crude oil exportation does not overwhelmingly outdo in the balance of the oil monopoly’s revenue structure.

There have been some changes in the balance between revenue from exporting crude oil and services, especially since 2009. In the first quarter of 2010, PetroVietnam reported its service revenues growing 69.7 percent year on year to VND33.1 trillion (US$1.8 billion), only VND7 trillion shy of crude oil export revenue.

Mr Dang Minh Hong, Deputy General Director of PetroVietnam, affirmed: “PetroVietnam now can go on both feet, namely oil and gas services and production.”

Providing services for oil and gas survey, production and trading in Vietnam is considered as an attractive business sector with a market value amounting to US$12 billion in 2009. In previous years, Vietnamese enterprises held only nearly 20 percent of the market share.

In 2009, PetroVietnam decided to concentrate on providing oil and gas services so as to raise the service market share of domestic enterprises to 30-35 percent. This determination was realised when PetroVietnam encouraged its members to use services provided by sister companies inside the oil and gas monopoly. At the same time, PetroVietnam restructured and professionalised service providers by merging its units to avoid overlapping operations.

In 2009, PetroVietnam reported to rake in over VND90 trillion from service provision, counting for more than a third of its total revenue in 2006-2009 and occupying about 38 percent of the market share. In 2010, the group planned to raise service revenues to VND115 trillion.

Mr Dinh La Thang, President of PetroVietnam, said impressive results were attributed to the use of internal services. But, this did not mean PetroVietnam’s services have weak competitiveness on the outside market.

He added: “Over 60 percent of service revenues came from contracts signed with customers outside the group.” Apart from growing up in Vietnam, PetroVietnam also exports oil and gas services to regional countries.

Encouragingly, the revenue growth was mainly contributed by oil and gas-related services, not finance, insurance, transportation and construction. Mr Dang Minh Hong asserted: “Manufacturing, installing, maintenance services for oil derricks and gas pipeline systems and other technical services for surveying and exploiting works made up two thirds of the group’s total revenues.”

At present, Vietnam’s oil and gas technical services are being developed very quickly. Domestic enterprises like Vietsovpetro – a Vietnamese – Russian oil and gas joint venture – and PetroVietnam Technical Services Corporation (PTSC) have successfully manufactured one part of oil derricks and offshore oil drilling services. In addition, PTSC has received offers for cooperation with other companies in Singapore, India, Japan, Malaysia and Australia to fabricate oil drilling platforms and other offshore works to serve for offshore oil and gas production.

However, Vietnam’s oil and gas industry witnesses some limitations in developing technical services. Domestic service providers are still unable to assume high-tech services. Vietnamese firms can only act as subcontractors for foreign contractors in the construction of Dung Quat oil refinery and Phu My and Ca Mau fertiliser plants.

Still, PetroVietnam now has to hire the South Korea-based SK Group to advise operations of Dung Quat oil refinery. In the mechanic sector, the group has to order drilling and pumping equipment and ships from foreign nations.

Even, the group has to purchase floating storage offloading units from foreign countries. PetroVietnam ordered the country’s largest shipbuilder Vinashin to build the first FSO to gradually upgrade the capacity of domestic firms but technical faults frequently occurred, causing much damage for the group.

In short, with US$12 billion a year and growing, the Vietnamese oil and gas service market is no longer small. In order to take larger market shares and expand global operations, Vietnamese companies need to overcome the technical and technological limits to produce and provide high-tech products and technical services.

VCCI

Tags: Vietnam oil and gas