Foreigners shun local oil ventures after price slide
Foreigners shun local oil ventures after price slide
Reeling from the downturn of the global oil market over the last two years, foreign investors in the Vietnamese oil and gas industry are facing difficulties in finding new partners to proceed with projects currently under construction.
As a result of these difficulties, some foreign companies have even decided to pull out of projects in Vietnam. Among these, US firm Chevron decided to transfer 100 per cent of its stakes in two oil projects and a gas exploration project to Vietnam’s state-run oil and gas group PetroVietnam. The transfer fee was not disclosed; however, the total investment for the field development and construction of these projects was estimated to be more than $10 billion.
Similarly, Thailand PTT has not made any progress in obtaining an investment certificate for a $22 billion oil refinery and petrochemical complex in the central province of Binh Dinh. The project was initiated four years ago when global oil and gas prices were at their peak.
A leader from the Binh Dinh People’s Committee confirmed that the developer had failed to present a suitable business plan due to the Thai firm still seeking new investors to join in the project.
At the $4.5 billion Long Son petrochemical complex in the southern province of Ba Ria-Vung Tau, the joint venture’s biggest shareholder SCG is currently in the process of seeking out new partners after previous partner Qatar Petroleum International quit from the project in 2015 due to restructuring plans, leaving a 25 per cent stake.
At the beginning of 2016, Gazprom Neft, a giant petroleum company from Russia, decided to cease negotiations with PetroVietnam on the potential sale of a 49 per cent stake in the sole operational refinery Dung Quat in Vietnam, citing Vietnam’s inability to offer the benefits it desired.
According to Professor Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises, the withdrawal of foreigners from Vietnam’s petroleum projects is not unreasonable. “The supply in the global market now is exceeding the demand, causing a sharp decline in prices. Therefore foreign investors have to adjust their plans,” Mai said.
Oil prices have reached their lowest levels of the past 13 years, causing huge difficulties for both producers and retailers.
Although Vietnam has had 10 oil refinery and petrochemical projects with the potential to produce more than 60 million tonnes of oil per year, only Dung Quat in the central province of Quang Ngai is currently operational.
Oil companies delayed making decisions on some 68 major projects worldwide last year, accounting for some 27 billion barrels of oil and equivalent natural gas, bringing 2015’s total deferred spending to $380 billion industry-wide, according to energy consultancy Wood Mackenzie.
