Oil is one of the most valuable resources. This is because it is the principle source of energy. Therefore, effective management of revenues from oil may lead to economic prosperity of a country. United Arab Emirates is one of the countries that provide evidence of how good management of revenues from oil may lead to economic prosperity.
The country has experienced meteoric economic growth due to effective use of revenues from oil. Oil has helped in fuelling the development of other sectors of the country’s economy. These include tourism, housing, and education (Rostin 3).
However, various countries have been unable to use revenues from oil effectively. Nigeria is one of the countries that continue to have extreme levels of poverty despite having huge oil reserves (Falola and Heaton 11).
This highlights the importance of effective management of revenue from the oil. Vietnam is one of the Asian countries that have huge oil reserves. The country strives to use revenue from oil to improve the welfare of its citizens.
Vietnam’s petroleum industry has come a long way since Vietsovpetro’s initial exploration of crude oil in the Bach Ho oil field in 1986 (Alpert 51). Since then, Vietnam has exploited more than 200 million tons of oil. Vietsovpetro is the largest company in oil exploration.
Vietsovpetro is a joint venture between Russia and Vietnam. Petrovietnam, a state owned company, owns 51% of the Vietsovpetro. JSC Zarubezhneft owns the remaining 49% of the company (IBP 70). Vietsovpetro is the fifth largest company in Vietnam.
Oil exploitation by Vietsovpetro accounts for approximately 90% of the total oil exploited in Vietnam. Continued exploitation has led to the development of the petroleum industry. The industry is one of the major sectors that help in the growth of the economy of Vietnam.
Revenue from oil accounts for approximately 25% of the annual budget revenue of the country. Vietnam is the third largest country in South East Asia according to oil reserves, exploitation and exportation (IBP 70).
Figure 1.1 Vietnam’s annual crude oil production
The discovery of new oil fields has led to significant increase in Vietsovpetro’s revenue. In 2011, the company had revenues of more than $5 billion (Anon. para 1).
This figure may seem small when compared to dominant players in the global oil industry such as ExxonMobil. However, the increase is vital in ensuring the continued development of the company into a global corporation. In 2011, Vietsovpetro produced slightly more than 6.4 million metric tons of oil (Anon. para 6).
This was more than the projected output of the company. The company projects higher revenues in the future. This is due to the price volatility of oil. Vietsovpetro is not the only company in the industry. The company faces stiff competition from Qatar Petroleum International. However, government support gives Vietsovpetro a competitive edge in the industry.
Development of Vietnam’s petroleum industry has led to the development of numerous auxiliary industries. Massive investments in technology have helped in fuelling the growth of the industry. These investments have helped in the expansion of Vietnam’s petroleum industry into the region and the world market.
If the current trend continues, the industry is likely to become one of the most competitive industries in the region. This would greatly benefit the economy of Vietnam. The development of the industry would help in improvement of the welfare of the Vietnamese citizens.
However, the industry continues to face various challenges that necessitate it to make considerable capital investments (IBP 70). Vietnam forecasts great improvements in the oil industry. The country forecasts that by 2020, the immanent capital retrieving rate (IRR) accounting would reach about 43% (Viettrade para 4).
Vietsovpetro is the major player that would help in the development in the industry. Development of the oil industry would help in the development of other energy related industries. These include nitrogenous fertiliser, chemicals and the gas industry.
However, it is vital for the Vietnam government to ensure that there is planned development of the industry. This would ensure the long-term stability of the industry.
The Vietnam government has a strategy for the development of the industry up to the year 2015. The strategy has six orientations that are vital in the development of the industry (Vietrade para 5). These orientations are outline below.
The government plans to make the petroleum and gas industry a vital branch of the economy. This industry would help in the development of the economy over the next several decades (Vietrade para 6). Technology is vital in the development of the petroleum and gas industry.
Therefore, the government plans to make the industry a major sector that would help in the technological development of the country (Metz and Turkson 231). Technological development in the oil industry would facilitate the development of other industries.
The government also intends to use oil in forming a strong economic corporation. The government is one of the major players in the industry. Therefore, growth of the industry would enable the government to become a strong economic corporation (Vietrade para 7).
Since Vietnam is a socialist government, it is vital for the government to become a strong economic corporation. This would help in better management of revenues from oil. However, this would necessitate the government to regulate the political environment in the highly volatile region.
The government should desist from activities that may make it face sanctions from the diplomatic community. Sanctions may derail the efforts of the government to become a strong economic corporation.
The Vietnam government intends to increase efforts aimed towards the discovery, exploitation and exportation of the vast oil and gas complex in the country (Vietrade para 8). Recent discoveries of new oil reserves prove that Vietnam may have huge reserves of unexploited oil.
Therefore, it is vital for the government to improve discovery efforts. In addition, the government intends to expand exploitation activities in overseas locations. Therefore, Vietsovpetro will continue to be a major organisation that would help the government to achieve its goals.
Vietsovpetro is currently contemplating venturing into other markets. The company intends to follow the example of other highly successful state owned enterprises that have ventured into the international market. These include CNPC-PetroChina and Sinopec.
Both companies are highly successful state owned Chinese companies. Vietsovpetro intends to venture into the Malaysian, Cuban, Nigerian, and Peruvian markets. Successful venture into the international market would guarantee the future development of the company.
The Vietnam government also intends to increase the development of the oil filter and natural gas industry (Vietrade para 9). Development of this industry would help in improving the economy of the country. It would facilitate the development of the Vietnamese manufacturing industry. This would help in broadening the economy of Vietnam.
The Vietnam government also intends to diversify the mode of investment and business (Vietrade para 10). These investments would help in the gradual development of the competitive oil and gas market. These investments would ensure the long-term stability of the industry (Papageorgiou and Spatafora 12).
Finally, the Vietnam government intends to enlarge the types of petroleum and gas services to ensure that they contribute towards energy security. In addition, the government strives to ensure the protection of the national sovereignty and ecological environment (Vietrade para 11).
Protection of national sovereignty necessitates the government to continue being a major player in the industry. This would ensure that Vietnam residents are the major beneficiaries of revenues from oil.
In most developing countries, multinational corporations are the major beneficiaries of revenues from oil. Various regulations would ensure that oil exploration does not have a negative effect on the environment (O’Rourke 45).
The Vietnamese petroleum industry has many companies that perform different roles that help in the development of the industry. There are companies that engage in exploiting petroleum, processing and trading, designing and constructing petroleum services, and training workers.
These companies have highly skilled managers and employees. In addition, the companies use modern technologies. The activities of petroleum companies get special attention from Vietnamese and Russian political leaders. This is because they both have interests in Vietsovpetro, the dominant player in the industry (Sumsky, Hong and Lugg 331).
The activities of other companies in the industry may have a direct or indirect effect on Vietsovpetro. Regulating the development of the oil industry would help in the industrialisation and modernisation of Vietnam’s economy.
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