ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Companies

PetroVietnam shaken as scale of overseas losses comes to light

Public Security Ministry is looking into who is responsible for $900m in losses

Huge losses on PetroVietnam projects overseas have led to a government probe. Observers worry this may lead to excessive caution by officials and business leaders.

HANOI -- Pressure is mounting on Vietnam Oil and Gas Group, the country's state-owned oil company, after a government report revealed massive losses on its overseas projects.

A report by the Ministry of Industry and Trade found that PetroVietnam, as the company is known, has frozen or is unable to recoup its investments in 11 of its 13 overseas projects, local media reported.

Losses from the projects are estimated at nearly $900 million.

It is unclear how much blame the government will assign to management for the financial missteps. PetroVietnam CEO Nguyen Vu Truong Son announced his resignation, and the Ministry of Public Security has launched its own investigation.

Son became CEO of PetroVietnam Exploration Production, an oil development unit, in 2009 and was named CEO of the parent company in 2016.

The failures in overseas exploration and mining projects mostly happened between 2009 and 2012, according to the industry ministry's report, soSon was held responsible.

The company's Venezuelan project, which is expected to log one of the company's biggest losses, began in 2010. The $12.6 billion joint venture had been expected to produce 200,000 barrels of crude oil a day. But Venezuela's unstable economy and runaway inflation have eroded the project's profitability. PetroVietnam is estimated to have lost nearly $500 million on that project alone.

The report found that projects in Peru, Malaysia, Myanmar and Iran had been suspended, as they did not deliver the expected results. Most of the projects had failed, it concluded.

The security ministry is investigating whether some of the lost funds ended up in the pockets of PetroVietnam officials, according to a diplomatic source. "People are worried because it is not yet known how far the investigation will go," the source said.

Former PetroVietnam Chairman Dinh La Thang, left, is led into court by police in Hanoi on Jan. 8, 2018. He was sentenced to 31 years in prison for his role in losses at the company.   © AP

In 2017, Dinh La Thang, PetroVietnam's ex-chairman and a former transport minister, was arrested for costing the company about $36 million in losses during his time as head of the oil company. Thang was sentenced to 31 years in prison in January 2018, ostensibly for his role in the company's ballooning losses, although some say he was actually jailed for corruption.

Thang was close to former Prime Minister Nguyen Tan Dung, archrival to current Communist Party chief and President Nguyen Phu Trong. Some experts say Thang's arrest was part of a power struggle that took place when Trong became president last October.

Political power in Vietnam is increasingly in Trong's hands. State-owned companies avoid making important decisions for fear of being accused of making bad business decisions. With the government becoming more risk-averse, "all kinds of administrative procedures are slightly behind schedule," said a representative with a Japanese trading company.

Speculation is rife that Trong will remain in power after his current term ends in early 2021, prompting caution among government officials and business leaders.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media