PROSPER FLAGS FOR OIL AND GAS INDUSTRY IN LATE 2020

The harmful impact of the COVID-19 outbreak in early 2020

Experiencing the previous year with many fluctuations from the market yet oil consumption remained at an acceptable level, in 2020, on the contrary, was a difficult time for the oil and gas industry. COVID – 19 hits in the beginning time have driven oil prices to the lowest record rate, causing heavy losses to many large corporations in the world.

Source: VIRAC General

During the first half of 2020, crude oil demand decreased harshly in response to countries’ blockade policy and social distancing efforts. Leading activities such as transport and industrial production have to put on hold, which certainly alleviates the overall oil utilization. According to the IEA report, as of November 2020, the world consumed an average of 91 million barrels of oil a day, down to 8.8 million barrels compared to the same period last year. 

Source: VIRAC General

The decline in demand led to a series of negative impacts on the world crude oil value. The year 2020 saw Brent oil prices plummeted by nearly 40% over last year, from 50 USD per barrel to 30 USD per barrel. In addition, the contract oil price will likely drop to a negative figure as VSCB prediction, considering companies have to suffer from overflowing inventory costs. Besides, WTI, the oil series that dominates the US market, in April 2020 dropped to negative 37.6 USD per barrel for the first time. After all, the overall market will not likely recover soon if the epidemic is still under no control.

Following the market trend, domestic gasoline prices started to decline in the first and second quarters, then the third quarter sought to prosper but still moderate compared to the same period last year. In particular, the second part saw the highest decrease from a series of domestic gasoline, in which the cheapest was kerosene with an average of 8,000 VND/liter and the most costly is RON 95-IV sold at 14,000 VND/liter.

Source: VIRAC, Petrolimex

Until November, gasoline prices once again plunged due to some regulation of the Trade and Finance Ministry. Specifically, E5RON92 gasoline decreased by 224 VND/liter to have a new price of 13,885 VND/liter, RON95-III drop by 14,701 VND per liter, and lastly, kerosene priced modestly at 9,562 dongs per liter.

Vietnam oil reserves remain high and redundant, especially when the need for this commodity is less than 30% compared with the previous time. In March 2020, oil stocks at two refineries Dung Quat and Nghi Son could exceed the permitted level, noting that domestic businesses are under enormous pressure from both the inputs and outputs.

Prioritize using renewable energy to ensure national energy security

More related news, renewable energies are seeking chances to take over the powering market in both Vietnam and the international arena.

Although oil and gasoline are undeniably the primary fuel for industrial activities, in the future, this commodity could be replaced by more environmentally friendly energy sources. As predicted by VCBS, starting in 2020, the demand for crude oil will diminish compared to the annual growth rate of 1% per year, mostly due to the rising use of electricity for transport technology. As of 2035, while the petrochemical industry would prosper the oil and gas industry, global transport loss can eliminate those flourishes that petrochemicals bring.

Source: VIRAC General

In Vietnam, the government has set a renewable energy growth target of 15-20% of the total primary energy supply by 2030 and a plan to 25-30% by 2035.

PVN efforts in the context of crisis

As the prime domestic oil and gas supplier, with every 1 dollar reduction in oil prices, PVN’s oil and gas export revenue will decrease by approximately 225 thousand USD per day. As expected, PVN Group and its affiliates will face severe challenges in the second quarter and probably the whole year when the price hits rock bottom at 20 USD a barrel.

After the first 9 months of 2020, the total revenue of the Group reached 423.2 trillion dongs, down 24.5% over the same period last year. Especially in March, the Group earned 49 trillion dongs, less than 19.2% compared to the monthly plan. In total of the first quarter, PVN made 165 trillion dongs, equaling 90.9% of the first quarter plan and accounting for 25.7% of the whole year plan.

Despite the unfortunate loss, PVN Group still strives to regularly maintain the operations upstream. As a result, oil mining production in the first nine months reached 8.64 million tons home ground and 1.38 million overseas, exceeding plan 9.4% and 5.2%. PVN’s oil reserve index reached the target right from June this year, leading to the excellent completion of the whole year crude oil exploitation target from the beginning of December (10.62 million tons on December 5, 2020).

Vietnam’s oil and gas industry expects positive changes in the coming year.

In the past two years, oil and gas reserves tended to decrease enormously, in 2019 falling to 13.4 tons, which created favorable flourishment to new oil and gas projects in the coming year.

Notably, in December, petroleum welcomed the most high-priced against the last nine months, proving that demand has gradually recovered and commodities are well circulated. Specifically, Brent oil rose 51.8 USD per barrel, while West Texas Oil (WTI) rose 1.5% to 48.53 USD per barrel. Both have reached unprecedented record highs since early March 2020.

Source: VIRAC General

Many major oil and gas projects are implemented.

Since oil reserves decrease over time, potential oil and gas projects could extend operation to satisfy the rising demand. Many upstream gas field projects are looking forward to great achievements in the coming period, including Lot B – O Mon and Blue Whale projects. With an investment of 8 billion dongs, the Block B – O Mon field has a reserve of 176 billion m3 of natural gas and could produce a capacity of 7 billion m3 of gas per year. Simultaneously, the Blue Whale gas project will give 9.7 billion m3 of gas per year, of which the gas reserve capacity takes up to 150 billion m3.

Currently, natural gas is serving mainly the urgent needs of thermal power plants. More favorably, a few LNG projects are under construction following the rising value of this type of power in the region. The upcoming LNG chains run in both public and private models, including investment from individuals entities and ownership of EVN or PVN for the infrastructure. In the near time, Vietnam needs to develop more LNG using power plants with a total capacity of 15,000 to 19,000 MW to satisfy the nation’s growing electricity demand. to satisfy the nation’s growing electricity demands.


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