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Vietnam premier calls for ways to cope with tumbling oil price

Vietnam premier calls for ways to cope with tumbling oil price

Friday, January 01, 2016, 12:08 GMT+7

Prime Minister Nguyen Tan Dung has asked a government body and state-run Vietnam National Oil And Gas Group to come up with the best solutions to falling oil prices, which will cause a negative effect on the national coffers this year.

The requirement of the Vietnamese premier was set out at a meeting chaired by the Ministry of Industry and Trade in Hanoi on Thursday.

A drop in world oil prices last year resulted in a loss of tens of trillions of Vietnamese dong [VND1 trillion = US$44 million], though overall tax collection rose 12 percent year on year, Prime Minister Dung said.

Oil prices pared on Thursday ended 2015 sharply lower as the "black gold" was battered by prolonged global oversupply and a slowdown in energy-hungry China's economy, according to AFP.

Brent crude settled up 82 cents at $37.28 a barrel, rebounding from a near 11-year low of $36.10 hit earlier in the Thursday session, Reuters reported.

Meanwhile, the U.S. benchmark West Texas Intermediate (WTI) rose 44 cents to $37.04 a barrel, an 11-percent year-on-year drop in December, according to Reuters.

As the oil price is expected to fall further this year, PM Dung asked the ministry and its oil and gas arm Vietnam National Oil And Gas Group, better known as PetroVietnam, to brace for the time ahead and find the best ways to cope with the plummeting trend.

Nguyen Quoc Khanh, acting chairman of the board of directors and general director of PetroVietnam, said for every $1 fall in global oil prices, PetroVietnam will suffer a VND5.4 trillion ($237.6 million) drop in revenue given its current production capacity.

This will in turn cause a VND1.5 trillion ($66 million) decrease in tax payment and a VND560 billion ($24.64 million) decline in post-tax profit, Khanh added.

The average cost of oil exploitation at oilfields managed by PetroVietnam in 2016 is expected to reach $27.4 per barrel, with the highest rate of $58 per barrel at the Song Doc oilfield, off the southernmost province of Ca Mau, and the lowest expense of $12.7 per barrel at those in the Cuu Long Basin, off Ba Ria-Vung Tau Province.

So it will be efficient for production at PetroVietnam’s oilfields if world prices hit $45 per barrel, he said, adding that if the price falls below $45, it will be inefficient to pump at some oilfields.

As reported by the Ministry of Finance in its 2016 draft budget estimates unveiled at a meeting in Hanoi on Wednesday, the state budget is forecast to earn VND54.5 trillion ($2.4 billion) worth of revenue from crude oil sales this year, considering a projected yield of 14.02 million tons at the average price of $60 per barrel.

The $60-per-barrel estimate was first given by Deputy Minister Do Hoang Anh Tuan at a press meeting in October.

Such a low estimate, a $40-per-barrel drop compared to the $100-per-barrel projection last year, will offer the ministry bigger room for the maneuverability of budget collection, Tuan said.

The draft budget estimates came out at a time when crude oil was continuously traded below $50 per barrel in August-October.

In the global market, as of December 31, North Sea Brent, the European benchmark for oil, had dropped almost 35 percent over the year, while WTI fell 30 percent, AFP reported on Thursday.

In 2014, Brent and WTI lost 48 percent and 46 percent compared to the previous year.

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