An oil field of Vietnam Oil and Gas Group, Rock-bottom oil prices were hitting the group hard. — Photo pvn.vn

Vietnam Oil and Gas Group, known as Petrovietnam, estimated a loss worth up to US$3 billion in revenue this year if crude oil prices remained at rock-bottom levels of $30-35 per barrel as in recent days.

At a recent Petrovietnam meeting on measures to cope with the widening repercussions of the novel coronavirus (COVID-19) pandemic and tumbling oil prices, its director general Le Manh Hung stressed that now was the most difficult time for the group in its development history.

Hung urged all of its subsidiaries to work together to seek opportunities, asking for focus to be placed on enhancing corporate governance, improving operation efficiency, increasing labour productivity and encouraging savings.

It was estimated that for every $1 drop in oil price, Petrovietnam’s revenue would fall by around $225,000 per day. Thus, for the full year, the loss could amount $3 billion if oil prices did not recover from the rock-bottom levels after heavy losses recently.

Hung said that the group would develop measures to cope with different scenarios of oil prices, even with the worst scenario in which the operation of oil fields and oil refineries must be halted.

According to the group, crude oil prices suffered heavy losses recently, trading at around $36-37 per barrel, compared to $45 on March 6. In comparison, average production cost of PVN was $51 per barrel.

The consumption demand for oil and petrol saw declines of more than 30 per cent due to the COVID-19 pandemic as travelling demand collapsed, resulting in high inventories at downstream businesses like PVOIL, Binh Son Refining and Petrochemical Joint Stock Company.

PVN forecast that if the COVID-19 pandemic continued in the second quarter of this year, the demand for oil and petrol would drop significantly, which would heavily affect PVN’s business results.

In the scenario of crude oil prices averaging at $45 per barrel, PVN’s revenue was estimated at VND570.6 trillion, VND70 trillion lower than its plan which was developed based on the crude oil price of $60.

It would also be time for the group to restructure its operations for optimal efficiency and promoting cooperation to consolidate its value chain, Hung said.

Oil collapsed due to weak oil demand caused by the spread of the COVID-19 pandemic and a price war between two of the biggest crude producers in the world.

Russia refused to cut production while Saudi Arabia responded by slashing prices and ramping up production.

Oil futures traded near their lowest levels in 20 years at nearly $21 a barrel on the New York Mercantile Exchange. Recoveries of nearly 20 per cent were seen on early Thursday trading but analysts warned that the rally was short-lived.

Petrovietnam’s total revenue in the first two months of this year was estimated at VND116 trillion (nearly $690 million), 5.1 per cent over the target. — VNS