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Inspections reveal illegalities at Petrolimex

Released at: 17:10, 08/09/2016

Inspections reveal illegalities at Petrolimex

Photo: Duc Anh

Government Inspectorate finds legal violations in investments by Petrolimex.

by Duy Anh

The Government Inspectorate of Vietnam (GIV) has found serious violations within the VND2.25 trillion ($101 million) in investments made by the Vietnam National Petroleum Group (Petrolimex) in banking, insurance and real estate.

Many high-value investments did not follow policy, went against the equitization plan approved by the Prime Minister, or did not follow the resolution from its Board of Directors (BoD), the GIV inspection unveiled.

In particular, the increase in its investment in the Petrolimex Group Commercial Bank (PG Bank) by VND400 billion ($17.9 million) and the Petrolimex Joint Stock Insurance Company (PJICO) by VND171 billion ($7.6 million) were not approved by the Prime Minister and the Ministry of Industry and Trade (MoIT).

The State-run energy distributor also invested VND232 billion ($10.4 million) into banking, insurance, and real estate and these were either not in accordance with the resolution from the company’s BoD or did not follow the Prime Minister’s decision to divest from non-primary business.

More importantly, many officials in Petrolimex’s subsidiaries and affiliate companies made serious legal breaches when using funds for investment.

The Vietnam Petroleum Transport Company (Vipco), a Petrolimex subsidiary, is one example. In 2008, former Vipco General Director Mr. Nguyen Dao Thinh signed a cooperation and investment contract with the Thien Loc Phu Trading Service Import Export Producing Company (Thien Loc Phu). Afterwards, Petrolimex transferred VND72.5 billion ($3.2 million) into a joint-account in which Thien Loc Phu was the account owner.

Afterwards, Vipco released a statement of agreement for Thien Loc Phu to withdraw VND20.1 billion ($901,284) but no reason for the withdrawal was given. Thien Loc Phu did not, in fact, conduct any business activities. The company has returned VND1.5 billion ($67,260) to Vipco but the remaining VND18.6 billion ($834,024) has not been recovered. This was considered by GIV to reveal a lack of responsibility causing serious consequences.

In April 2008, former Vipco Chief Accountant Mr. Vu Quang Khanh along with Mr. Thinh transferred VND483 million ($21,657) to former Thien Loc Phu Chief Accountant Ms. Nguyen Thi My Dung. This was considered by GIV to be a breach of financial management and the amount is still to be recovered.

With a total of VND19.1 billion ($856,444) not recovered, GIV has directed the Ministry of Public Security to determine Vipco’s violations and the individuals involved in the case.

Regarding the Petrolimex Hai Phong Company, GIV pointed out that, in 2006, Director Do Dong Ngoc signed a contract transferring the use of a 360 sq m parcel of land to Tu Son township in Hai Phong. This was considered by GIV to have exceeded the Director’s authority. The liability of VND540 million ($24,213) is also considered to be unrecoverable.

Within its core business of selling petroleum, Petrolimex wrongly calculated real consumption, which in turn led to a shortfall of VND5 billion ($224,200) in provisions to the price stabilization fund.

GIV required Petrolimex to take responsibility for all breaches that occurred during its management, capital and asset use, and operating activities. It also directed Petrolimex to cease paying three months wages to employees before their retirement and stop providing loans to affiliate companies for investing if these investments do not follow the equitization plan approved by the Prime Minister.

In April this year, JX Nippon Oil & Energy agreed to purchase an 8 per cent stake in Petrolimex. Though the amount has yet to be disclosed, the deal is believed to be in the order of VND4 trillion ($183 million).

Petrolimex operates some 5,400 petrol stations in Vietnam and controls roughly half of all petroleum sales. Even as economic growth has pushed up Vietnam’s demand for petroleum products to about 350,000 barrels a day, a lack of refineries has forced it to rely on imports. JX Nippon Oil will initially provide expertise in fuel station management and logistics. Its JX Holdings is also considering taking part in a refinery construction project in the south.

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