With effective and flexible management solutions, especially volatility management, effectively promoting the entire value chain of the Oil and Gas industry in the past 3 years, Vietnam Oil and Gas Group (Petrovietnam) not only stand firm in the difficult times but also rise spectacularly. Around this topic, a reporter from New Energy Magazine had an interview with Mr. Le Manh Hung – General Director of Petrovietnam.
Culture in corporate governance of Petrovietnam
Reporter: General Director, can you share why volatility management has been the focus of Petro VietNam’s motto during the past three years?
General Director Le Manh Hung: Petrovietnam is a leading large-scale economic group in the country operating in 5 main fields: oil and gas exploration and production, gas industry, electricity industry – renewable energy, oil and gas processing, oil and gas technical services. With the management model including the parent company and subsidiaries, the associated company has up to hundreds of companies. Petrovietnam’s key products are associated with essential needs for socio-economic development, such as crude oil, gas, electricity, petrol, fertilizer, etc. Besides, Petrovietnam is also a special enterprise, both representing the state in managing oil and gas activities, as well as a production and business enterprise (production and business) according to the market mechanism… Therefore, Petrovietnam is a very large apparatus, operating continuously and synchronously. strongly influenced by both external and internal factors. These impacts can help the apparatus operate more strongly if it is well managed, and can also weaken the apparatus if the negatives are not limited.
In the first 7 months of 2022, thanks to volatility management, Petrovietnam can boost refining output, taking advantage of the period when the profit margin of the refining industry is very high. The fertilizer industry also has good performance due to favorable market prices and safe and stable production…
External fluctuations such as fluctuations in the business environment (supply and demand, prices, macroeconomic factors…), the legal environment (policies, mechanisms, laws…), public science technology (speed of development, digital transformation, energy displacement…), and natural environment (climate change…). All activities of the Oil and Gas industry are always greatly influenced by these factors.
The internals of Petrovietnam have also changed greatly over the years. In terms of organizational structure and operating model, from where most of the units with 100% state or state capital are dominated, there are now many Petro VietNam member companies that have changed to joint stock companies, joint ventures, and joint stock companies. links… Human resources also fluctuate. Successive generations replace each other, good times and bad times also change over time.
These are the dialectical factors for Petrovietnam’s leadership to build an effective management philosophy in volatile times. The larger the model, the more impact it will have. The root is to manage and fundamentally change even in the corporate culture, with the ultimate goal of timely adaptation, minimizing negative impacts on the business ecosystem, and taking advantage of the chance to get results.
In fact, over the years, volatility management has penetrated deeply and become a culture in the corporate governance of Petrovietnam, not only in the parent company but also in all member units. Petrovietnam always focuses on closely following market developments, updating policies, developing science and technology, the natural environment, socio-political conditions, etc., thereby researching and developing many scenarios and solutions. respective law. The Board of Directors of Petrovietnam issued Decision No. 110 on the “Set of response solutions” for 5 groups of governance, market, finance, investment, and policy mechanism in early 2020. Before each operating period, leaders and Leaders of all units must actively make forecasts, build scenarios and adjust production and business plans to suit reality. Petrovietnam decentralizes synchronously and empowers the people who best understand the decision-making work and take responsibility, to make quick, accurate decisions and timely improvise. The leadership, coordination of resources, and support, along with inspection, supervision, and risk management from Petrovietnam to its member units must be consistent, and systematic, connect the value chain, and ensure continuity. routine and direction…
Volatility management is a very important factor that in recent years Petrovietnam has always put on top, and will continue to do so in the future, because the nature of things is always in motion, constantly changing to develop. develop.
Reporter: In the first 7 months of 2022, Petrovietnam’s crude oil production, gas-electricity supply and other energy products have all exceeded the plan, and financial indicators are very positive. How did volatility management contribute to that outcome, CEO?
Oil and Gas workers working on the construction site
General Director Le Manh Hung: First of all, looking back at the governance lessons of 2020. When the oil price fell to the lowest level in history due to the impact of the Covid-19 pandemic and the oil and gas market, Petrovietnam’s motto That is, by all means, we must optimize the value in each field, bring costs and cost prices to the level of “vital competition”. Market demand during the Covid-19 pandemic also dropped to very low levels, so we had to find ways to boost consumption and avoid inventory. Because of financial difficulties, it is necessary to make efforts to overcome difficulties, and at the same time save and take advantage of every opportunity to deploy production and business safely. With those mottos, Petrovietnam has surpassed 2020 spectacularly with total revenue of over 566 trillion VND, contributed 83 trillion VND to the state budget, and achieved a consolidated profit of over 19.9 trillion VND.
By 2021, when the cost of capital has been brought to the most competitive (optimal) level, it must continue to maximize it by connecting units, to put the invested assets into effective use. The most effective and must bring the revenue to the maximum. In 2021, BSR surpassed the 100 trillion VND mark for the first time, and PV GAS also surpassed 80 trillion VND for the first time… Petrovietnam achieved total revenue of over 640 trillion VND, paid 112.5 trillion VND to the state budget, especially achieved the highest consolidated profit from 2015 to now, approximately 52 trillion VND.
Continuing that growth momentum, 2022 is forecasted to mark another new milestone for Petrovietnam in terms of both revenue and profit and budget payment. Petrovietnam’s mining output from the beginning of 2022 to now has exceeded the plan by 22% and is equivalent to the same period in 2021, although the fields are on the decline. It is thanks to the management solutions combined with science and technology that Petrovietnam is applying to try to keep the output level stable in the past 3 years. Oil refining capacity also exceeded 8%; fertilizer production exceeded about 9%; gas and electricity supply to the maximum according to market demand. Financial efficiency through the expansion of the consumption market in combination with international business caused revenue and financial indicators in the first 7 months of 2022 to continue to grow very high compared to the same period in 2021.
It can be affirmed that the results are based on the governance foundation and achievements that Petrovietnam has reaped from the years 2020, 2021. In which, volatility management plays a decisive role.
In early 2022, we promptly forecast the consequences of the Russia-Ukraine war, conflicts affecting the macro economy that will cause crude oil prices to increase sharply. The volatile market will lead to a scarcity of domestic petroleum supply and disruption of supply chains. Thanks to volatility management, Petrovietnam can take advantage of the opportunity to boost refining output, taking advantage of the period when the profit margin of the refining industry is very high. The fertilizer industry also performs well due to favorable market prices and safe and stable production. That is the result of volatility management, forecasting, scenario building, and drastic systemic action in both production and commercial sectors.
Reporter: Recently, Petrovietnam has been very aggressive in digital transformation. Can you tell us about the outstanding results that Petrovietnam’s shareholder roadmap has achieved so far?
General Director Le Manh Hung: In the context of the strong industrial revolution 4.0, digital transformation is of strategic significance for any business to improve operational efficiency and competitiveness. It can be asserted that it is either digitally converted or does not exist. That is the inevitable trend of all businesses, not only Petrovietnam.
Right from 2019, Petrovietnam established a Steering Committee on digital transformation, then selected and hired consulting units to build a digital transformation vision and strategy throughout Petrovietnam.
Employees of PV GAS
After the consulting unit went through a survey and evaluation, the results showed that the awareness of digital transformation in the units was very different and still at a relatively low level of digital maturity. Therefore, the first thing is to find a way to make it so that the leaders of Petrovietnam the leaders of its member units, must clearly understand and be aware of the role and nature of digital transformation. To successfully implement a digital transformation, Petrovietnam has built a culture of sharing, and coordination, combined with a training process and continuous learning efforts. It sounds very unrelated, but in essence, digital transformation is the process of turning from “worm” to “butterfly”, leading to a change in mindset and business model; change from the current way of doing things to a new way of doing things, improving competitiveness and bringing higher efficiency. Digital technologies such as artificial intelligence (AI), cloud computing (Cloud Computing), Internet of Things (IoT), and big data (Big Data) are application tools in the digital transformation process. Through this process, Petrovietnam has spread awareness about digital transformation and its role in the whole system, making it part of the oil and gas culture.
Petrovietnam has completed the construction and officially obtained a digital transformation strategy, has a long-term overall roadmap for digital transformation and a digital vision, thereby accelerating business model change and improving production efficiency. business. In terms of organization, Petrovietnam has built and formed permanent agencies, departments, and digital transformation apparatus in Petrovietnam and its member units; has digitized the entire process system and database; applying AI to optimize the management system, analyze data, for example, analyze geological and petrographic data, thereby putting it into exploratory drilling, exploration drilling, exploitation… as well as the process planning, management of operation and maintenance of industrial plants.
Digital transformation includes steps to digitize processes and data, optimize processes and data, then use tools (Cloud Computing, AI, IoT, Big Data…) to apply this process… Currently, Petrovietnam is in step 2 and some work is in the early stage of step 3, which is the application of technologies to the management and operation of production and business in the units, including forecasting and volatility management, providing orientations and recommendations. Those are the great achievements in the digital transformation of Petrovietnam up to now.
Petrovietnam General Director Le Manh Hung inspects the operation on the control platform of Sao Vang Mine Center
Reporter: Can the General Director share more about Petrovietnam’s orientation and goals in the last months of 2022? In 2023, what is the motto of Petrovietnam?
General Director Le Manh Hung: After 7 months in 2022, Petrovietnam has achieved very positive results. Therefore, Petrovietnam’s main task in the last months of the year is to maintain that achievement. This is also not simple because forecasting in the last months of 2022 will have many disadvantages, such as falling oil prices, low market demand, and global economic recession… Especially, in major economies like the US, China, and EU… interest rates, and inflation increased sharply; the Russian-Ukrainian war is not over; the arid climate in many places; The Covid-19 pandemic… will lead to a trend of shrinking production in the world, declining exports, reducing demand for electricity and gas… Those are risks that Petrovietnam must manage, through forecasting, volatility management, building contingency plans, taking advantage of opportunities to achieve the highest production and business plan in 2022, and having a contingency in 2023.
Second, it is necessary to continue good management of the production system; good financial management is not subjective.
Third, strongly implement large, key, and internal investment projects to take advantage of investment opportunities.
Fourthly, it is necessary to thoroughly and drastically handle key projects. For example, the Thai Binh 2 Thermal Power Plant Project must come into commercial operation this year, there is a plan for the Long Phu 1 Thermal Power Plant Project, the Dung Quat Oil Refinery Upgrade and Expansion Project, and the policy of the Refinery Complex Project. Oil and Long Son Energy Reserve… In particular, the Block B gas-power project must have a deployment plan to meet the most optimal first gas time.
Fifth, it is necessary to thoroughly handle difficult projects, and find a way to escape losses for companies that are in difficulty.
Entering 2023, Petrovietnam’s motto of action needs to be based on the development of the past years, especially in 2022, to continue to consolidate and innovate governance with volatility management as the focus; next is the digital-based governance that has formed over the years; continue to promote the connection of resources to strongly invest in large projects; expanding investment and development cooperation and international business based on the advantages of Vietnam’s relations with other countries and markets, focusing on Southeast Asia, Russia and the Middle East, North America…
I think that, in 2023, Petrovietnam needs to make efforts to manage in the direction of “the future will be the traction, the present, and the past will be the thrust” to continue to develop sustainably and reach out to the big sea.
Reporter: Sincerely thank the General Director!
In 2023, Petrovietnam needs to make efforts to manage in the direction of “the future will be the traction, the present, and the past will be the thrust” to continue to develop sustainably and reach out to the big sea.
Trúc Lâm
