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Dung Quat oil refinery not very attractive to investors

VOV News English
The shares of oil and gas companies have seen a price decrease of 49% by November compared with the same period last year, the sharpest so far.
Dung Quat Oil Refinery not to close Dung Quat oil refinery plant embarks on expansion Heavy investment poured into Dung Quat EZ Dung Quat, the biggest and only oil refinery operating in Vietnam, may be put into equitization in the time to come. Binh Son Company, which runs Dung Quat, has had enterprises valuated in a preparatory step for equitization.

Binh Son, with VND35 trillion in chartered capital, is among the 10 Vietnamese biggest enterprises. From 2009 to November 2015, the company had churned out 36 million tons of petroleum products, worth VND710 trillion.

As Dung Quat capacity is believed to satisfy only one-third of domestic demand, PetroVietnam, the national oil and gas group, drew up a plan to increase the refinery capacity from 140,000 barrels per day to 200,000 barrels per day by 2017. 

The crude oil sharp price fall of 50% in the world market has made investors shrink back. Thai investor PTT Group, which plans to develop the US$22 billion oil refinery, is likely not to publicize the project assessment result by the end of the year as initially planned. 

Most recently, Dung Quat said its products have to compete fiercely with imports, while its inventory volume has been increasing sharply, which may exceed the maximum storage capacity.

Binh Son is meeting with difficulties in looking for new capital sources to expand production, while it cannot expect big support from the State as the public debt has become relatively high. Equitizing the enterprise proves to be the best way for it to look for capital sources.

With oil and gas shares attract investors? According to VietinBank Securities Company, oil & gas shares saw prices drop by 49 percent by November. However, for investors with powerful financial capability who plan long term investments, oil & gas shares are still worthy investments because the demand is stable as it is an essential product for all economies. 

In April, Russian energy group Gazprom signed a contract with PetroVietnam on buying 49% of Binh Son’s stakes. Meanwhile, BMI, a market survey firm, has affirmed that a lot of foreign energy groups have shown their interest in the state’s capital withdrawal from Binh Son. These include Nippon Oil & Energy Corporation, Petróleos de Venezuela and a group from the Republic of Korea. 

Apart from Dung Quat, the government of Vietnam also plans to divest 49% of shares in PVOil, reduce its ownership ratio from 51% to below 20 percent in PVcomBank, and from 96.7% to below 75% in GAS and to 75% in Petrolimex.