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CEO Meeting August 2022: Grasping trends, applying technology in volatility management, Petrovietnam improves efficiency and maintains growth momentum

Petrovietnam President and CEO Le Manh Hung emphasizes the main task in the coming time is to continue to closely follow market developments, the macro-economic situation, manage fluctuations to run effectively production and business activities, maintain the planned targets, especially in the face of new developments in the market, and may transition to a period of falling oil prices and unpredictable geopolitical fluctuations.

On 8th August afternoon, Petrovietnam President and CEO Le Manh Hung chaired the regular production and business management meeting in August 2022 online with heads of the Group’s subsidiaries about the performance results in July and the first 7 months of 2022; and forecasted and updated solutions to perform tasks in August and the remaining months of 2022.

Minimize negative impacts, make good use of opportunities, achieve high efficiency

Prime Minister Pham Minh Chinh and leaders of ministries, branches and Hau Giang province cut the ribbon to inaugurate Song Hau 1 Thermal Power Plant

In July and the first 7 months of the year, the world economic and political situation experienced many fluctuations, the Russia-Ukraine war, the US-China tension, interest rates were continuously raised, inflation increased in all regions, costs increased sharply, input prices increased, supply chains were difficult, and profit margins of enterprises were narrowed. The world macroeconomic data showed more and more clear signs of recession. Global economic growth slowed amid a bleak outlook and falling business confidence. On 26th July, in the updated report “World Economic Outlook”, the IMF lowered its forecast for global GDP growth in 2022 to 3.2% from 3.6% released in April. Regarding inflation, the IMF forecasted that inflation rate in 2022 in advanced economies would reach 6.6%, increase in comparison with the forecast of 5.7% released in April. The global PMI fell sharply in July, according to JPMorgan, the index fell to 51.1 from 52.2 in June 2022, the lowest level in two years, showing that manufacturing had signs of contraction and consumption demand declined. 

President and CEO Le Manh Hung delivers the closing speech

Particularly in July, crude oil price dropped sharply, the situation was complicated and on the way to continue to decline. The average Brent oil price in July decreased by 9% compared to the average in June. In early August, oil price continued to decline and fell to the lowest level since before the Russia-Ukraine war. The average price of petroleum products in July also decreased by 13-22% compared to the average in June 2022. Besides, the mobilization of gas power was still low compared to the plan. It is expected that in the coming months the demand for gas for power generation may be lower because priority will be given to mobilize hydroelectricity in the rainy season. Fertilizer price is in a downtrend, trading is slow, the market is back to oversupply...

National Assembly Chairman Vuong Dinh Hue listens to report on the operation of Dung Quat Oil Refinery

Faced with that situation, many businesses fell into a difficult situation, had to narrow their production, leave the market, and many big petroleum business hubs also suffered heavy losses. According to the General Statistics Office, in the first 7 months of the year, the number of businesses withdrawing from the market was 94.6 thousand, an increase of 18.7% over the same period. On average, 13.5 thousand businesses withdraw from the market every month. 

However, with effective and flexible solutions of management and administration, especially volatility management, effective promotion of the entire value chain of the industry, which have been drastically deployed throughout the past years, has helped Petrovietnam forecast accurately, react promptly and flexibly to fluctuations, effectively utilize and promote resources in the value chain to minimize damage from negative impacts, make good use of market opportunities, maintain stable, smooth and efficient production and business activities. Overcoming technical difficulties, crude oil production in July reached 0.9 million tons, exceeding 19% of the July plan; it reached 6.38 million tons in 7 months, exceeding 22% of the 7-month plan and equaling 73% of the 2022 plan. Along with that, gasoline production in 7 months exceeded 8% of the plan, fertilizer production exceeded 9% of the plan. Production and supply of gas, electricity and other energy products were all at a high level, meeting the market demand to the fullest; thereby contributing to stabilizing the market and macro-economy, ensuring national energy security and economic growth. Production and business in those fields both recorded very positive results.

Prime Minister Pham Minh Chinh visits the workers of Song Hau 1 Thermal Power Plant

The Group’s financial indicators remained positive, keeping high growth momentum. Total revenue of the Group in the first 7 months of 2022 was estimated at 547.7 trillion dong, 64% higher than the 7-month plan, 98% of the year plan and 56% higher than the same period in 2021. The Group’s contribution to the State budget in 7 months was estimated at 79.6 trillion dong, 74% higher than the 7-month plan, 23% higher than the 2022 plan and 47% higher than the same period in 2021.

Employees make efforts for assigned tasks and plans

In July, activities of operating production, business and investment were implemented drastically and timely by Petrovietnam. The Group has issued a directive on following the market, enhancing security and safety for the remainding time of 2022. The Group’s President and CEO held a meeting at subsidiaries on the development of the plan for the last 6 months of the year, thereby proposing specific solutions for the implementation of the plan in 2022. Investment has seen many positive changes; on 16th July 2022, the Group inaugurated Song Hau 1 Thermal Power Plant - an important milestone to help the Group promote its experience to continue to invest, build and put such power projects as Thai Binh 2 Thermal Power Plant, Long Phu 1 Thermal Power Plant into operation soon. In July 2022, the Group’s President and CEO held a meeting and evaluated the investment work in the first 6 months of 2022 to identify investment bottlenecks, difficulties in the implementation process, identify specific solutions and tasks for investment in the fields. Also in July 2022, the Group had working sessions with the Chairman and Vice Chairman of the National Assembly on perfecting mechanisms and policies for the development of the oil and gas industry, amending the Petroleum Law held directly at subsidiaries of the Group. 

Focus on volatility management in the last 5 months of the year

Ensure safe and stable oil and gas activities 

Delivering direction speech, Petrovietnam President and CEO Le Manh Hung assessed the overall picture of the Group’s production, business and investment activities in July and the first 7 months of the year, recognizing the great efforts of the whole system in the difficult and volatile context. It is assessed that there would be many difficulties based on the analysis of the macro-economic situation with increasingly clear signs of recession: the Russia-Ukraine conflict has not ended, strategic competition, trade decline, production shrink, complicated situation of Covid-19 epidemic, US-China tensions, weak market demand… The Group’s President and CEO directed to continue closely following market changes, macroeconomics, forecasting and seizing opportunities, focusing on volatility management, plan update, risk control (inflation, interest rates, exchange rates, markets…), maintaining the goals of the production and business plan, ensuring the highest completion of the set plan.  

The Group’s President and CEO also directed a number of specific contents such as: Focusing on implementing solutions to ensure the completion of increasing reserves and production output at the highest level; Strengthening solutions to expand the market, especially the market for gas products, refining and petrochemicals, fertilizers, technical services; Strengthening linkage chains, promoting investment activities to contribute to controlling risks and taking advantage of opportunities to increase scale, as well as implementing investment strategies and key projects; Continuing to carry out long-term scientific tasks, research and development, creating a stepping stone for the Group’s products and industries when the traditional field is affected by the energy transition; The whole Group focuses on effectively implementing the digital transformation project, deploying smart factories, building a large database. Closely coordinate with drafting and appraising agencies to complete the Draft Petroleum Law (amended), legal documents governing oil and gas activities; Update oil price scenario to put into construction, planned in 2023.