PetroVietnam squandered trillions of dong in non-core business activities
Prime Minister Nguyen Tan Dung has agreed with a report that included proposals to deal with PetroVietnam’s failures.
According to the inspectorate, PetroVietnam misused over VND126 trillion (USD6.03 billion) worth of its investment and development fund by extracting a part of its net profits.
Instead of investing in major oil and gas projects and business expansion as well as contributing capital to oil and gas contractors, the firm used the funds to subsidise its subsidiaries.
PetroVietnam spent VND352 billion (USD16.86 million) on a provincial project to construct a road connecting Ca Mau City with the Ca Mau Gas Power Fertiliser complex.
The firm also used over VND40 billion (USD1.91 million) from the fund for communal road construction and over VND20 billion (USD958,313) for building Tra My Nursery School in Vung Tau City.
Only three of PetroVietnam’s 11 oil and gas contractors have paid owed money to the state revenue.
PetroVietnam was also found to have misused VND34 trillion (USD1.62 billion) worth of profits for the 2006-2010 period that the Government had earmarked for the company to keep for business investment.
The group had used over VND15.6 trillion (USD747.48 million) of the sum to contribute to the Rusvietpetro Joint Venture, taking on the firm’s debt, and increasing the chartered capital of the PetroVietnam Exploration Production Corp. (PVEP). Deputy Prime Minister Hoang Trung Hai concluded that these activities were inappropriate as they did not belong to major oil and gas projects.
The investigative agency proposed the PM to take measures to deal with the misuse.
PetroVietnam advanced VND1.65 trillion (USD79.06 million) for some investment projects but almost all the recipients, including Dung Quat Oil Refinery’s management board, the Ministry of Transport and several localities had yet to repay the loans.
The inspectorate proposed the PM to assign the ministries of Finance, and Planning and Investment to take measures to recover the outstanding loans.
PetroVietnam had invested VND114.6 trillion (USD5.49 billion) in various projects by the end of 2010. Of that sum, nearly VND46 trillion (USD2.2 billion) was pumped into oil and gas projects and VND27.8 trillion (USD1.33 billion) went to support industries.
The firm poured nearly VND5.6 trillion (USD268.32 million) into non-core businesses like real estate, insurance, and banking and finance, many which incurred huge losses.
PetroVietnam incurred total losses of VND1.14 trillion (USD54.62 million) in 51 companies in 2008. Its losses continued to rise in the following years, to VND1.27 trillion (USD60.85 million) in 2009 and VNDVND2.38 trillion (USD114.03 million) in 2010.
PetroVietnam was also found to have ignored best value when employing contractors on investment projects during the 2006-2010 period.
During the five-year period, the group carried out 384 investment projects worth VND301 trillion (USD14.42 billion) and USD16.9 billion. However, the firm had decided itself to select contractors for two bidding packages worth VND32 billion (USD1.53 million) at the Dung Quat Oil Refinery while its subsidiaries selected contractors for four bidding packages valued at VND700 million (USD33,540), USD110.5 million and EUR600,000, violating bidding regulations.
In 2006, instead of buying a 2D seismic vessel following prime ministerial approval, PetroVietnam allowed its subsidiary, PVEP, to buy an outdated fishing boat at a cost of USD30 million.
The firm also allowed PVEP to sell the Binh Minh 2 seismic research vessel in 2009 for USD29 million under a five-year interest free instalment plan but no payments have been made.
After receiving a land lot for the construction of its headquarter in Nguyen Du, Hanoi, PetroVietnam Construction Corp (PVC), a PetroVietnam’s subsidiary, sold it for VND96 billion (USD4.6 million).
PVEP sold Thai Binh Hotel project to PVC at VND111 billion (USD5.31 million) in 2010 but has yet to receive any payment.
The inspectorate said that by the end of 2010, PetroVietnam had privatised 17 subsidiaries with estimated proceeds of VND23.8 trillion (USD1.14 billion) but the firms had paid only VND21.8 trillion (USD1.04 billion) to PetroVietnam, violating regulations on the issue.
The investigative agency proposed that the prime minister requested PetroVietnam to collect the remaining VND2 trillion (USD95.83 million) owed by its privatised subsidiaries. The firm also needs to require PVEP to recover USD29 million from the sale of Binh Minh 2 vessel and the outstanding VND111 billion from the sale of the Thai Binh Hotel.
The PM has agreed to all the proposals and requested PetroVietnam to review its business and investment operations, along with focusing on its core businesses in order to avoid squandering Government investment.
When asked about the responsibility of current Transport Minister Dinh La Thang, who acted as PetroVietnam’s chairman for the 2006-2010 period, Deputy Government Inspector Ngo Van Khanh said, “Both PetroVietnam’s leaders and their subordinates must be held accountable for their wrongdoings. More efforts must be made to define the responsibilities of the people involved.”
As of December 31, 2010, PetroVietnam held assets worth nearly VND470 trillion (USD22.52 billion).