Business development strategy of gas source for petrovietnam gas joint stock corporation from 2015 to 2020

HP CHI HO CHI MINH CITY OPEN UNIVESITY UNIVERSITÉ LIBRE DE BRUXELLES SOLVAY BRUSSELS SCHOLL OF ECONOMICS & MANAGEMENT MBQPM4 LE THI PHUONG HANH BUSINESS DEVELOPMENT STRATEGY OF GAS S

HP CHI

HO CHI MINH CITY OPEN UNIVESITY UNIVERSITÉ LIBRE DE BRUXELLES

SOLVAY BRUSSELS SCHOLL OF ECONOMICS & MANAGEMENT

MBQPM4

LE THI PHUONG HANH

BUSINESS DEVELOPMENT STRATEGY OF

GAS SOURCE

FOR PETROVIETNAM GAS JOINT STOCK CORPORATION

FROM 2015 TO 2020

MASTER FINAL PROJECT MASTER IN BUSINESS QUALITY AND PERFORMANCE MANAGEMENT

Ho Chi Minh (2014)

STATEMENT OF AUTHENTICATION

I hereby declare that this thesis entirely done by myself The quotations and datum used in the thesis are cited detail sources and the highest precision of my knowledge and understanding This paper does not necessarily reflect exactly the viewpoints of Solvay Brussels School and Open University of Ho Chi Minh City, Faculty of Economics & Management as well as Petrovietnam Gas Joint Stock Corporation

Written guarantee

LE THI PHUONG HANH

ACKNOWLEDGEMENT

I sincerely thank you all Professors of Solvay Brussels School and Open University of Ho Chi Minh City, Faculty of Economics & Management had imparted a lot of valuable knowledge and help me throughout the course, especially for Professor Martin for giving knowledge in the class, providing guidance and suggestions helped me during preparing this thesis and valuable baggage for me in life afterward

I highly appreciate to the Board of Planning Division and Market Development Division

of PV Gas and all their members were helpful and create favorable supporting and conditions for me to complete this thesis

We also have special thanks to family, related classmate and first group of MBQMP4 support and help me a lot during this course

DISCLAIMER

The ownership and copyright to this thesis is held by the author and Solvay Brussels School and Open University of Ho Chi Minh City, Faculty of Economics & Management The information of this thesis to be keep confidentially and not to be used, transferred, disclosure, reproduction or conversion of this thesis without prior acceptance

TABLE OF CONTENTS

STATEMENT OF AUTHENTICATION

ACKNOWLEDGEMENT

DISCLAIMER

ABBREVIATIONS

LIST OF GRAPH

LIST OF TABLE

INTRODUCTION

CHAPTER 1 - PRESENTATION OF PV GAS 1

1.1 PV Gas general overview: 1

1.2 PV Gas establishment and development overview milestones: 1

1.3 PV Gas projects in operation: 2

1.4 PV Gas projects under construction & investment: 4

1.5 PV Gas projects in the North: 5

1.6 Other PV Gas’ investment: 6

CHAPTER 2 - INTRODUCTION OF NATURAL GAS 7

2.1 Introduction Of Natural Gas 7

2.1.1 Overview of Natural Gas 7

2.1.2 Attractiveness of Natural Gas: 7

2.1.3 Advantages of Natural Gas 7

2.2 Method Supply Of Natural Gas 8

2.2.1 Pipeline 8

2.2.2 Compressed Natural Gas ("CNG") 9

2.2.3 Liquefied Natural Gas ("LNG") 9

CHAPTER 3 - ANALYSIS OF PV GAS ENVIRONMENT BUSINESS 10

3.1 Macro Environment 10

3.1.1 Political factors: 10

3.1.2 Economic factors: 11

3.1.3 Social- Cultural factors: 13

3.1.4 Technological factors: 14

3.1.5 Environmental factors: 14

3.1.6 Legal factors: 15

3.2 Micro- environment 20

3.2.1 Demand conditions 20

3.2.2 Factor Conditions 23

3.2.3 Related and Supporting Industries 26

3.2.4 Firm Strategy, Structure and Rivalry 29

CHAPTER 4 – STRATEGIC CHOICES AND IMPLEMENTATION PLAN TO 2020 36 4.1 The opportunities and challenges of PV Gas: 36

4.1.1 Opportunities: 36

4.1.2 Challenges: 37

4.2 Strategic Choices and Implementation plan to 2020 43

4.2.1 Ensuring safe, stable and continuous operation of gas system: 43

4.2.2 Increasing PV Gas’ revenue and profits by enlarging and expanding gas system:43 4.2.3 Increasing investments to ensure PV Gas’ position in international gas industry:48 4.2.4 Re- structure organization to meet PV Gas’ expansion and development: 49

4.2.5 Focusing on research and development: 50

CONCLUSION 52

Summary of PV Gas’ business and development strategy to 2020: 52

Suggestion main development strategies: 52

Conclusion: 52

REFERENCES 54

APPENDIX 56

ABBREVIATIONS

Petrovietnam Gas Joint Stock Corporation PV Gas

Million standard cubic meter per day mmscmd

LIST OF GRAPH

Graph 2 PV Gas Overview Milestones

Graph 3 Gas projects in operation

Graph 4 Gas projects under construction & investment

Graph 5 Comparison of Emissions

Graph 6 Summary of Vietnam GDP growth rate from 2005 to 2013

Graph 7 Violation of right of way

Graph 8 Proportional supply gas to Customer up to 2015

Graph 9 Summary of Current Domestic Vietnam Gas Prices Graph 10 Forecast of delivered gas to South Vietnam power plants Graph 11 Forecast of low gas pressure demand of South area

Graph 12 Proportional supply gas to Customer up to 2020

Graph 13 Gas shortage forecast (base case)

Graph 14 Forecast of required investment capital

LIST OF TABLE

Table 1 Forecast of Vietnam GDP growth rate

Table 2 The assessment of macro environment of gas industry Table 3 Vietnam natural gas resources

Table 4 Summary of PV Gas workforce

Table 5 Market share CNG and PV Gas S

Table 6 SWOT analysis of PV Gas

Table 7 Vietnam gas demand by region

Table 8 Forecast of financial factors to 2020

Table 9 Forecast income of PV Gas’ labours

INTRODUCTION

Purpose and objectives of the Thesis:

PV Gas is a monopoly in supplying high pressure gas to end-users (such as gas power plants, fertilizer plants) and maintains the major low pressure gas supplier to other gas customers (such as industrial customers, transportation and households) and the biggest wholesaler of LPG in Vietnam market Over 20 years of establishment and development,

PV Gas has achieved a certain success and increasingly asserted its position and role in the development of the Vietnamese economy

In few years later, PV Gas will face many challenges and difficulties with gas demand increases rapidly while domestic gas resources dwindle and decline as well as appearing many LPG competent rivals To grow and compete with rivals in the market, PV Gas needs to have the appropriate strategy for the situation, chances and goals to maintain its position of unique corporation in supplying dry gas to end-users and the biggest wholesale

of LPG

In this thesis, I would propose to focus on analysing not only the challenges and difficulties that PV Gas’s facing to but also the implementations, plans and strategies that

PV Gas should carry out to meet its targets in gas market

Therefore, I have chosen the thesis of "Business strategy development of gas source for

PV Gas from 2015 to 2020" to study the business strategies that PV Gas should perform

in order to meet its targets

Implementation process:

To carry out this thesis, there are some theories to be applied such as:

macro-environmental (external marketing environment) factors that have an impact on PV Gas’ business, operation and development

 Porter's Five Forces of Competitive Position Analysis which based on the concept

that there are five forces to be determined PV Gas’ competitive intensity and

attractiveness in gas market in order to understand the strength of PV Gas’ current competitive position, and PV Gas’ position that it is looking to move into

 SWOT analysis (alternatively SWOT matrix) which is a structured planning

method to evaluate PV Gas’ strengths, weaknesses, opportunities, and threats in its

business, operation and development in order to identify the internal and external factors that are favourable and unfavourable to achieve its target

The contents of this thesis include following chapters:

Chapter 1: Presentation of PV Gas

Chapter 2: Introduction of Natural gas

Chapter 3: Analysis of PV Gas environment business

Chapter 4: Strategic choices and implementation plan to 2020

1

CHAPTER 1 - PRESENTATION OF PV GAS

1.1 PV Gas general overview:

PVGAS is a dominant gas supplier in nationwide, one of the major members of Petrovietnam National Oil & Gas Group (PVN) with 96% equity owned, listing in Ho Chi Minh Stock Exchange from 2011

PV Gas’ development strategy is to focus on four key business segments as belows:

 Dry Gas: operates gas pipeline system including offshore and onshore pipelines to

supply gas to power plants, fertilizer plants, industrial plants, transportations, etc…

 LPG: leading producer and importer of LPG, with the market occupation circa

70% market share

 Condensate: leading condensate supplier for gasoline production condensate

produced from gas processing plants

 Services: focus on (i) Gas transmission, maintenance and equipment services, (ii)

Consulting for gas projects, and (iii) Management, operation, maintenance and repair services for gas related projects

Graph 1: PV Gas General Overview Source: PV Gas Potential Investment 2012

1.2 PV Gas establishment and development overview milestones:

PV Gas was established on September 20th, 1990 to engage in gathering, importing, transporting, storing, processing, distributing and trading of gas and its products in order

to stop flaring gas offshore