State capital divestment in oil and gas distribution in Vietnam offers plenty of opportunities for foreign investors to join in the industry, economic experts said.
Royal Dutch Shell PLC has recently expressed its interest in becoming the liquefied natural gas supplier for PetroVietnam’s projects, while simultaneously penetrating deeper into the Vietnamese petroleum distribution system via acquiring a stake in PetroVietnam Oil Corporation (PV Oil).
During a recent meeting with PetroVietnam, Shell’s deputy chairman Douglas Buckley said that the company wants to buy the stake that PetroVietnam will divest from PV Oil. The company also enquires after the criteria of selecting a strategic investor for PV Oil.
In fact, it wasn’t the first time Shell showed its interest in PV Oil. Previously, in the middle of the year, Shell submitted the dossier to join the race to become the strategic investor of PV Oil. According to Decision No.1979/QD-TTg, PV Oil had to complete the sale of shares to strategic investors within three months after its divestment plan was approved.
However, at the time, Cao Hoai Duong, general director of PV Oil, stated that the company issued stricter criteria for strategic investors, thus, it might be necessary to extend the deadline so that interested investors have time to negotiate.
PV Oil requested the Ministry of Industry and Trade and the Prime Minister to extend the deadline to early July, which was promptly refused. As a result, Shell and other foreign investors, such as South Korea’s SK Energy and Japan’s Idemitsu, lost the opportunity at strategic stake in PV Oil.
Besides PV Oil, foreign investors are also looking to the divestment of Vietnam National Petroleum Group (Petrolimex) to enter the Vietnamese petrol market. Petrolimex has recently proposed the government lift the limit on foreign ownership of its charter capital to 49 percent from the current 20 percent so that there will be better odds of selling State shares.
Petrolimex currently dominates the domestic fuel market at 46 percent, with its market cap amounting to more than VND90 trillion (US$3.85 billion), a 5.6-fold increase over 2011.
The government is offering foreign investors opportunities to participate directly and indirectly in the petrol and fuel industry to improve the competitiveness and performance of domestic petrol firms.
There are over 14,000 petrol stations in Vietnam, of which Petrolimex has 5,200 stations, holding 45 per cent of the market, followed by PV Oil with 3,000 units, Thanh Le with 1,500 units, and Saigon Petro with 1,000 units. Petrolimex sold over 50 per cent of its products directly to customer and 20 per cent directly to industrial customers. However, there remains ample space for a newcomer to increase its market share, provided it proves competitive enough.
Seeing big opportunities in the fruitful market, Japan’s Idemitsu Q8 Petroleum Limited Liability Company (IQ8), the first foreign-owned petrol retailer in Vietnam, has recently also opened its third petrol stations in the northern province of Hung Yen, showing the company’s determination to occupy a bigger slice of the Vietnamese petroleum retail market.
Hiroaki Honjo, IQ8 general director, said that Idemitsu Q8 will take advantage of its experience in the petroleum business in Japan and Europe to develop its business in Vietnam.
According to experts, Idemitsu Q8’s joining the petroleum retail market contributes to a stable petroleum supply in Vietnam, especially as demand is predicted to increase high in the next years. However, the market already established its own order, and as a newcomer, Idemitsu Q8 needs a separate direction.