When will there be a “level playing field”

Inadequacies in bidding

It can be said that from 2014 to now is the most difficult period for enterprises operating in the DVDK field under the Vietnam Oil and Gas Group (PVN). In the context of low oil prices, most oil and gas enterprises have cut, extended, or even stopped implementing plans to search, explore and exploit oil and gas, resulting in a decrease in DVDK demand. strong.

Difficulties for domestic DVDK suppliers are multiplied when facing stiff competition from foreign DVDK suppliers. In fact, of the total DVDK value of 167.2 trillion dong in 2017 of PVN enterprises, only 74.7 trillion dong (equivalent to 45%) of suppliers in PVN (in 2016 it was 55%).

It is likely that many people will think that PVN’s DVDK suppliers because they are not capable of competing with foreign enterprises have lost their market share. However, that is not the case, even the opposite.

In the context of fierce competition in the DVDK market, with the attitude of not sitting still waiting for work, with the capacity and prestige in the market, the enterprises operating in the DVDK field of PVN have signed a series of contracts to supply large services with foreign partners, for example, contracts to supply 5 mining rigs for the Darman Project invested by ONGC (India); PVD Offshore via Akita (Japan) for geothermal drilling services; PV Drilling won the contract to supply PV DRILLING I drilling rig for Total E&P Myanmar’s drilling campaign; PV DRILLING III rig performs drilling campaign for Petronas contractor in Malaysia; PV DRILLING VI rig conducts drilling campaign for IPC contractor (LUNDIN) in Malaysia. The proportion of DVDK outside the industry of PVN’s DVDK enterprises is constantly increasing. If in 2016, this number was only 45%, in 2017 it was 55%,

One question arises: Why did PVN’s DN DVDK lose at home but win away?

The root cause of that paradox is the inadequacies in the regulations on bidding activities to provide DVDK. Specifically:

Due to the deep and prolonged decline in oil prices, to ensure economic efficiency, operators at oil and gas contracts must take measures to reduce costs. One of the cost-saving solutions applied by operators is that the procurement and selection of service providers are mostly done through competitive bidding or bidding. However, at this time, foreign DVDK suppliers are very difficult in terms of work, so with strong financial potential, they are willing to offer very low prices when participating in bidding (sometimes accepting losses) to have contracts, making it very difficult for domestic DVDK suppliers in general and PVN in particular to get a job even if there are priority criteria. And even if contractors, oil and gas operators have priority to use services in the industry,

Article 26 of the 1993 Petroleum Law and the Law No. 10/2008/QH12 amending and supplementing a number of articles of the Petroleum Law stipulate: “The contractor is entitled to sign contracts on DVDK, but must give priority to signing contracts on DVDK. contract with Vietnamese organizations and individuals”. However, the documents guiding the implementation of the Petroleum Law and petroleum contracts have not specified (not quantified) this content.

Article 57 of Decree No. 95/2015/ND-CP stipulating a number of articles of the Petroleum Law also only stipulates: “Using DVDKs and goods that Vietnamese organizations and individuals are capable of providing in principle in principle. ensure competition in terms of price, quality and schedule”. The absence of specific regulations did not encourage foreign contractors when participating in bidding to enter into joint ventures or use subcontractors that are Vietnamese enterprises as well as employ domestic workers.

Secondly, according to Clause 1, Article 14 of Decree No. 07/2018/ND-CP of the Government promulgating the Charter of PVN’s organization and operation, the participation in bidding of PVN and its subsidiaries is carried out. according to the provisions of Clause 5, Article 2 of Decree 63/2014/ND-CP (the decree detailing the implementation of a number of articles of the Bidding Law on contractor selection). Clause 5, Article 2 of Decree 63/2014/ND-CP reads: “In case the products and services included in the bidding package are the output of this company, and at the same time the input of the other company in the group and only in the market, it shall comply with the regulations of the Prime Minister”. But so far, there is no government regulation as a basis for implementation.

Unequal competition

The DVDK supply market is facing extremely fierce competition when the demand for DVDKs drops sharply, while the supply in the market is in excess. But in that context, domestic DVDK suppliers in general and PVN in particular are facing many difficulties and obstacles in terms of mechanisms and policies in bidding activities and providing oil and gas services. .

PV Drilling driller on a geothermal rig in Akita Japan

The removal of these difficulties and obstacles, especially in the implementation of the Petroleum Law, Bidding Law and sub-law documents is extremely urgent.

In Clause 12, Article 1 of Law No. 10/2008/QH12 amending and supplementing a number of articles of the Oil and Gas Law also stipulates: “The bidding and signing of DVDK supply contracts are directly related to the search and sale activities. Exploration, field development and oil and gas exploitation shall comply with separate regulations promulgated by the Government. Therefore, the Government also needs to consider and issue regulations on bidding, signing service provision contracts and preferences when using domestic goods and services when petroleum contractors organize the selection of contractors. subcontractors to serve oil and gas activities; stipulates that foreign contractors must form a joint venture with domestic contractors or use domestic subcontractors when participating in bidding in Vietnam, unless the domestic contractor is not qualified to participate in any part of the bidding package. .

In addition, according to PV Drilling General Director Pham Tien Dung, while countries in the region such as Malaysia and Indonesia have and are still having barriers and policies such as requirements for the localization rate of contractors, licenses are granted. by Petronas, temporarily prepaying foreign subcontractor tax… in order to give incentives to domestic contractors and limit foreign contractors from providing DVDK, Vietnam does not. Foreign companies operating in the oil and gas field when entering Vietnam have almost no barriers, almost equal in tax with domestic enterprises. They bring foreigners to work freely, while some countries do not allow the use of foreign workers, only allowing the use of very few senior personnel.

Citing this issue, PV Drilling’s General Director Pham Tien Dung said: When PV Drilling brought the rig to Malaysia, it immediately forfeited 13% of the revenue. Then, after that, until the time of tax finalization, they will consider whether or not to refund the previous revenue. This only applies to foreign contractors, and domestic contractors do not. This alone has made foreign contractors more disadvantageous to domestic contractors when entering Malaysia.

Even when approaching the Malaysian market, PV Drilling has to sign a contract with an agent who is a domestic company with a license of the host country (Petronas License) to have the opportunity to access the market. To participate in the bidding is also not easy. In order to sign a contract with Petronas from 2015 onwards, when the global oil and gas market was plunging, the Malaysian Government introduced a policy of prioritizing work for domestic companies, only holding international tenders. economy when domestic companies have enough jobs.

Or like PV Drilling, if you want to enter the Indonesian market, you have to find a partner of this country and transfer 35% of the rig’s assets to that company while operating in Indonesia and have to change the flag to the Indonesian flag. After liquidating the contract, get 35% back, change the flag and go out.

From that fact, PV Drilling’s General Director Pham Tien Dung suggested ministries, branches and the Government to consider, research and implement specific and law-appropriate protection policies in order to fairly protect customers. Vietnamese oil and gas technical service companies.

Thanh Ngọc