PetroVietnam May Shut Down Fields, Trims Ouput if Oil Prices Dip Further

Low oil prices have induced Vietnam Oil and Gas Group (PetroVietnam) to consider shutting down or reducing production at some of its oil fields, a senior official of the country's national oil company (NOC) said, as quoted in Vietnam's Thanh Nien News Tuesday.

Such a move is being contemplated for its local oil fields if global crude oil prices fall below $30 per barrel, PetroVietnam Vice President Do Chi Thanh indicated Monday.

PetroVietnam had stated on Jan. 13 that it "will observe developments in oil prices in 2016 to direct and have timely solutions to cope with the volatility of oil prices from time to time" and to consolidate and strengthen "the market forecasts to actively balance the rational exploitation output of each mine compared with costs."

Thanh said the Vietnamese state-owned oil company posted revenues of $3.65 billion (VND 81.1 trillion) in January, equivalent to just 70 percent of its target as turnover tracked the 35.4 percent year-on-year decline in average crude oil prices to $32.4 per barrel. He added that three of the NOC's subsidiaries have suffered losses, including PetroVietnam Oil Corporation which has lost more than $4.5 million (VND 100 billion).

Meanwhile, Thanh revealed that Vietsovpetro -- a joint venture between PetroVietnam and Russia's Zarubezhneft -- is struggling to fund production. Last month, Vietsovpetro CEO Tu Thanh Nghia reported that the joint venture faced a deficit of around $230 million despite numerous efforts to reduce costs, including shutting down two of its subsidiaries and laying off 400 employees, according to Thanh Nien News report.

PetroVietnam announced a 24.8 percent decline in year-on-year revenue in 2015 to $24.63 billion (VND 560.1 trillion), while it produced 18.74 million tons of oil at an average cost of $24.4 per barrel compared to $36.4 in the previous year. For 2016, the company intends to reduce its output to 16.03 million tons and trim production costs by 10-20 percent.

Chee Yew has covered the upstream and downstream sectors of the oil and gas industry in Asia for more than 15 years. Email Chee Yew at cheeyew.cheang@rigzone.com

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