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Vietnam Oil & Gas Industry: Thirsty For Investment Capital

Vietnam Oil & Gas Industry: "Thirsty" For Investment Capital

Thursday 05, 12 2019
In the period of 2018-2030, the investment capital demand of Vietnam Oil and Gas Group (PVN) and its subsidiaries is expected to reach VND 620,000 billion.

This information was shared at the Energy Journey 2019 program under the theme "Petroleum enterprises with capital markets" organized by PetroVietnam Securities Company (PSI) from 29 to 30 November 2019 in Ba Ria - Vung Tau province.

Huge Capital Need

According to Bui Huy Long, Deputy General Director of PSI, of VND 620,000 billion invested in this period, PVN expects loans to account for more than 30% through traditional credit and domestic and international bond issuance.

Particularly for urgent projects including Thai Binh 2 Thermal Power Plant, Long Phu 1 Thermal Power Plant, a series of Block B gas projects, Blue Whale Gas Project, Sao Vang - Dai Nguyet Gas Project, the mobilized capital is up to USD 4 billion (equivalent to VND 45,000 billion).

Recently, the global credit rating agency, Fitch Ratings, has rated PVN’s Issuer Default Rating (IDR) as "Positive outlook", which is a favorable condition for PVN to improve its ability to raise capital in the international market, diversifying sources of capital raised for the Group's investment projects in the context of government guarantee restrictions.

However, although the flow of foreign investment capital into Vietnam is increasing, FDI in the oil and gas industry is on a declining trend (from USD 2 billion / year to only a few hundred million US dollars a year). In addition, policies related to the Oil and Gas industry are tightening, making investors worried.

Vietnam oil gas industry thirsty for investment capital

As a securities company under PVN, with the advantage of industry understanding, experience, and capacity to implement consulting and restructuring activities for the parent company and its related companies, PSI said that it would provide positive and effective support, and expand the capital mobilization channel for PVN and its subsidiaries in domestic and international markets.

Sharing at the conference, Mr. Vo Tri Thanh, an economic expert, said that the prospects of the world economy in 2020 and in the medium term through the forecasts of international organizations are quite similar in some categories including deceleration, slowing growth and rising uncertainty. For the energy sector, all businesses need to prepare well to cope with fluctuating oil prices. Forecasts for 2 years on oil prices are not accurate. While OPEC countries have cut production and Iran has been embargoed, the world is experiencing an oversupply. In addition, the US has become a major oil exporter in the world thanks to shale oil exploitation.

According to this expert, "uncertain risk management" is an issue that businesses need to pay attention to, especially in calling for and arranging investment capital for large projects.

Capital Raising Channels

According to Dr. Nguyen Son, Chairman of Vietnam Securities Depository Center, raising capital via bond issuance channel is an effective method on the stock market, which is suitable with the nature and financial structure of this channel of capital. The recent prosperity of the bond market is a good sign of the economy. The newly amended provisions of the Securities Law will create a healthy development for the bond capital channel in the future.

For petroleum enterprises, besides mobilizing capital via bank credit, it is necessary to attract capital from many other channels including export credit, bond issuance, financial leasing as well as increase FDI attraction, etc.

In the framework of the 2019 Energy Journey program, investors have visited, surveyed and learned about oil and gas projects including PV GAS Vung Tau Warehouse (PV GAS), Petrochemical Plant Cai Mep Gas of PetroVietnam Drilling Solution Corporation (DMC), Nha Be Petroleum Warehouse Enterprise of Vietnam Oil Corporation (PVOIL), as well as meeting and discussing with business leaders on matters of interest.

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