Japanese oil giant reveals reason for purchasing only eight per cent of Petrolimex’s shares

Since the equitization in 2011, Petrolimex has witnessed outstanding growth in sales in all key business areas including petroleum, transportation, gas and petrochemicals.

That JXTG Nippon Oil & Energy spent nearly VND4,000 billion (US$176 million) to own eight per cent of Petrolimex was marked as one of the largest investment deals of state-owned enterprises’ (SOEs’) equitization process in 2016.

The partnership of strategic partner JXTG - Japan's No.1 giant in the field of energy has helped Petrolimex continue to increase market share and expand investment.

Petrolimex has occupied the largest market share in Vietnam, at approximately 50 per cent with a range of 2,400 retail stores covering 63 provinces and cities nationwide, including those located in prime locations.

To dig deeper into the impact of equitization and especially the strategic partnership between one of the industry leaders in Vietnam and its Japanese’s counterpart, TheLEADER held an interview with Kotaro Sunaga, CEO of JXTG Group.

Could you tell us about the involvement of JXTG into Petrolimex? Why has JXTG Holdings Inc. decided to invest in Vietnam market in general and to select Petrolimex as your strategic partner in Vietnam?

Kotaro Sunaga: The nature of the oil business is basically the domestic business. So our company, JXTG has been starving our domestic market for long time and now owning 50 per cent of Japanese’ oil and gasoline market. The point is Petrolimex is very similar to our company.

Through the privatization process, Petrolimex and JXTG have had a close communication and we share the same view for the future development. Then we decided to negotiate with Petrolimex management board.

In addition, Southeast Asian market, where has an ever-increasing demand for energy to fuel economic growth, is an appealing destination not only for JXTG but also for many foreign investors. In this region, Vietnam is the most attractive market; therefore, we have chosen to invest in Vietnam and Petrolimex.

Can you explain the eight per cent stake that JXTG decided to buy at Petrolimex?

Kotaro Sunaga: In business, we need to secure the profit. We are considering to increase the share if our conditions and requirements are met. Eight per cent is the number that we have thoroughly considered based on an array of conditions and requirements in the negotiation process between JXTG and Petrolimex as well as the Government of Vietnam.

We look forward to a long-term partnership, so I don’t think huge share percentage is too necessary that we need to pursue.

It is suggested that the Government of Vietnam should have clearer and more detailed guidelines on the participation of foreign investors in the equitization process, especially some regulations related to controlling shareholder. What do you think about this statement and was there any difficulty that JXTG had in this process?

Kotaro Sunaga: I fully agree with the statement because we have become strategic partners before Petrolimex went listing. So, at that time, we mainly negotiated with the Government. I think the Government of Vietnam needs to promote information transparency to investors, especially foreign ones.

When it comes to M&A, investors often prefer to take over 50% of the shares to become controlling shareholder. However, our philosophy is that markets need to be controlled by the people or businesses of that country.

Therefore, we do not intend to negotiate majority share because we think the partnership is co-existence to further develop. Therefore, we have no plan if the Government does allow us to take more than 50 per cent. That’s ok for us.

With the similarities in business field and over 120 years of experience, has JXTG taken any action to promote the cooperation relationship?

Kotaro Sunaga: The partnership with Petrolimex has helped JXTG to step into Vietnam's potential petroleum supply market. As a strategic partner of Petrolimex, we will assist in enhancing our corporate governance, refining petroleum trading system in line with international standards.

We are also willing to cooperate in the development of new energy business apart from petroleum business, and to increase business value and provide Petrolimex technology and know-how from Japan.

How do you assess Vietnam’s investment environment in general and the potential development of Petrolimex in particular? Do you have any recommendation to promote the development of Vietnam’s oil giant in the future?

Kotaro Sunaga: Vietnam market is going up rapidly, obviously they need to expand the operation. They need to increase the number of gas stations to supply for the massive vehicles.

They also need to secure some funds to invest. So the equitization and listing bring good opportunities for them to capture the funds they need.

We (Petrolimex and JXTG) also have dialogues to discuss future development plans. We will support Petrolimex to improve its operation to strengthen its position in the domestic market and enhance its competitiveness in the global market.

Thank you very much!