Why Petrolimex is keen on being BSR’s strategic partner

Vietnam’s sole oil refinery operator, Binh Son Refining (BSR), plans to sell 4 per cent of its shares in an initial public offering (IPO) on November 7 and another 49 per cent to strategic investors next year, its Chairman said on August 10.


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BSR, which runs the Dung Quat Oil Refinery in central Quang Ngai province, will offer shares at VND14,600 ($0.64) at its November IPO, Chairman Nguyen Hoai Giang said.

It expects to raise VND1.9 trillion ($83.6 million) from the sale, which would value the entire company at around $2.1 billion. Details of its listing are yet to be made public.

The IPO is part of Vietnam’s wider drive to equitize State-owned enterprises to boost performance. The tardy process has gained more momentum since the new government took office last year.

BSR also plans to sell an additional 49 per cent stake to one or more strategic investors next year. Spain’s Repsol S.A. and the Vietnam National Petroleum Corp. (Petrolimex) are among those that have expressed interest in BSR’s strategic sale, Mr. Giang said.

Interest from Petrolimex

Petrolimex and BSR signed an agreement on August 10 whereby the former will prioritize buying Dung Quat’s oil products, liquid petroleum gas, and petrochemical products, and export refined products to Laos and Cambodia, the two companies announced in a joint statement.

Of the 29 domestic companies licensed as wholesale distributors in Vietnam, Petrolimex has about half of the retail market share, followed by the PetroVietnam Oil Corp. (PV Oil) with 22 per cent, according to Saigon Securities Inc. estimates. No other domestic distributor has higher total assets and equity, a larger storage tank network, its own transport fleet, separate transit depots, and greater bargaining power over purchase prices than Petrolimex.

The sector is very much the preserve of domestic players. Current regulations make it clear that a foreign investor is only allowed to participate in the petroleum retail market by purchasing shares in a domestic retailer and if it also invests in a domestic refinery, which is perhaps why Japan’s JX NOE acquired 8 per cent of Petrolimex last year for $178 million and agreed to co-invest along with a Vietnamese partner in the Nam Van Phong Oil Refinery project.

Roughly 30 per cent of Petrolimex’s input materials are currently supplied by the Dung Quat refinery while the remainder is imported. While the share of imports will most likely decline in the next five years when three domestic oil refineries – Long Son, Nghi Son, and Nam Van Phong – come into operation, what’s troubling is that apart from Nam Van Phong, in which Petrolimex contributed investment of $8 billion and which has a capacity of 10 million tons per year, the remainder are projects of the State-owned Vietnam Oil and Gas Group (PetroVietnam). 

PV Oil, as a subsidiary of PetroVietnam and also Petrolimex’s biggest competitor, will then hold more advantages in terms of material resources, creating a shift in the market and the competitive situation.

Being BSR’s strategic partner would not only allow Petrolimex to maintain a reliable source of supply but also to maintain its dominance against the country’s second-largest petroleum distributor, PV Oil, in the long term.

Petrolimex’s Chairman Mr. Bui Ngoc Bao was not available for comment at the time of writing, while the stake sale plan still needs approval from the government, which wholly owns BSR via PetroVietnam. Mr. Giang expected a decision to be made within the next three weeks.

With a total capacity of 6.5 million tons per year, Dung Quat’s full-year production this year is expected to reach 6.1 million tons, equivalent to about 122,000 barrels per day, nearly 20 per cent higher than its initial target, partly due to a tax cut on sales of gasoline and diesel fuel from the refinery.

VN Economic Times



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