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BÁO CÁO THƯỜNG NIÊN

2o11

PETROVIETNAM

Energy for National development

PETROVIETNAM2

TABLE OF CONTENTS

3 A message from Petrovietnam

5 Milestones in Petrovietnam’s Evolution

6 Organisation Chart

10 Lines of Business

12 Fields of Operation

14 Oil and Gas Exploration and Production

18 Refi nery, Petrochemical and Bio-fuel

20 Gas Industry

22 Power Generation

24 Petroleum Services

26 Technology, Research and Development

28 Training and Human Resources Development

30 Health, Safety and Environment Policy

31 International Cooperation

32 Corporate Social Responsibility

33Audited Consolidated Financial Statementsfor the year end 31 December 2011

ANNUAL REPORT 2011

ANNUAL REPORT 2011 3

A MESSAGE FROM PETROVIETNAM

Vietnam National Oil and Gas Group (Petrovietnam) is among the leading economic groups in Viet Nam today, making an average annual growth of 18-20% with a total turnover equal to 20% of the entire country’s GDP and contributing some 25-30% of the State Budget revenues.

In 2011, Petrovietnam achieved all the business and fi nancial targets with concrete fi gures demonstrated the reports. Petrovietnam is now focusing on the following fi ve key areas of operation: oil and gas exploration and production; refi nery and petrochemical; gas industry; power generation; and high-quality petroleum technical services.

In terms of oil and gas exploration and production, Petrovietnam is currently operating 20 oil and gas fi elds in the country and 5 others abroad. It is cooperating with various international petroleum companies in the implementation of 60 petroleum contracts at home and 17 contracts in 14 countries. In the next phase, Petrovietnam will continue to conduct more oil and gas exploration activities over the entire continental shelf of Viet Nam while at the same time, invest further in overseas exploration ventures.

On the refi nery and petrochemical sector, the Dung Quat Refi nery is now supplying 30% of the domestic demand. In the coming years, Petrovietnam will make more investment in upgrading of the Dung Quat Refi nery and construct the Nghi Son and Long Song Refi nery and Petrochemical Complexes, the Long Son Petrochemical Facility to bring up the total refi ning capacity to 16-17 million tons/year by 2015 and 30 million tons/year by 2025.

As for the gas industry, Petrovietnam will develop an integrated industry with focus given to the development of the national gas industry infrastructure with the completion of the gas industry infrastructure in the South and the formation of the infrastructure for the gas industry in the North and Central regions, ensuring suffi cient gas supply to the industries and daily public consumption, actively investing and developing the industry in a diversifi ed consumption market, aiming at a production of some 17-21 billion m3 of gas a year by 2020.

In the power generation sector, the company will participate in power generation as per the Government’s plan, focusing on gas-fi red generation in parallel with the gas industry development programme so that by 2015 the total power generation capacity of all Petrovietnam’s power plants could be over 9,250 MW.

In regard to petroleum technical services, Petrovietnam will continue to develop its capability to best meet the petroleum services demand at home while making fi rm steps towards the regional and international markets and fundamentally to meet the entire domestic demand by 2020.

Apart from being a spearheading economic group and an important tool for State macro-economic regulation, Petrovietnam also underlines its social responsibility to the labours, the public and the business community. The cooperation and development programmes with the provinces and cities, ministries and government agencies as well as socio-economic organisations by Petrovietnam are always attached to the various social security programmes with hundreds of billions of dong spent every year.

We are proud of what we achieved in the year of 2011. Those achievements are only possible thanks to the eff orts, labour and professionalism of men and women working in the petroleum industry of Viet Nam together with the eff ective and reliable cooperation of domestic and foreign partners.

On behalf of the management of Petrovietnam, I wish to express my thanks and appreciation to all partners and friends in the country and abroad for their close cooperation in the past years and look forward to the elevation of such cooperation in the future. I hope that you will get the necessary information about Petrovietnam through the pages of this brochure.

Yours sincerely,

PHUNG DINH THUC

CHAIRMAN OF THE BOARD OF DIRECTORS

Petrovietnam Headquarters

ANNUAL REPORT 2011


IMPORTANT MILESTONES IN PETROVIETNAM’S

EVOLUTION

PETROVIETNAM


PETROVIETNAM6

BOARD OF DIRECTORS

Dr. PHUNG DINH THUC

Chairman

Mr. NGUYEN THANH LIEM

Member

Mr. NGUYEN XUAN THANG

Member

Mr. VU KHANH TRUONG

Member

Dr. DO VAN HAU

Member

Mr. HOANG XUAN HUNG

Vice Chairman (Retired from 1 April 2012)

Mr. PHAN DINH DUC

Member

ANNUAL REPORT 2011


BOARD OF MANAGEMENT

Dr. DO VAN HAU

President and CEO

Mr. LE MINH HONG

Vice President

Mr. NGUYEN SINH KHANG

Vice President

Mr. NGUYEN QUOC KHANH

Vice President

Mrs. TRAN THI BINH

Vice President

Mr. NGUYEN TIEN DUNG

Vice President

Mrs. PHAM THI THU HA

Vice President

Mr. VU QUANG NAM

Vice President

(Retired from 1 September 2012)

Mr. NGUYEN XUAN SON

Vice President

Mr. NGUYEN VU TRUONG SON

Vice President

Dr. NGUYEN QUOC THAP

Vice President

Tam Dao II drilling rig

ANNUAL REPORT 2011


Internal Supervisory Board

Administration Offi ce

Personnel

Finance, Accounting and Audit

Planning

Construction

Petroleum Exploration

Petroleum Production

Bid Management

Petroleum Contract Management

Legal Aff airs

International Relations

Overseas Petroleum Projects Management

Science and Technology

Petroleum Processing

Training and Human Resources Development

Investment and Development

Inspection

Commercial and Marketing

Health, Safety and Environment

Gas

Power

Representative Offi ce in Ho Chi Minh City

Representative Offi ce in Latin Americas

Representative in Russian Federation and CIS

Board of Directors

Board of Management

ORGANISATIONAL CHART

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LINES OF BUSINESS

CORE BUSINESSES

• Petroleum research, exploration, production, transportation, processing, storage and distribution of oil and gas products at home and abroad

• Trading and distribution of oil and gas products, petrochemical materials and petroleum equipment and materials• Consulting, surveying, designing, constructing and repairing structures and facilities for the petroleum industry• Investment, generation and trading electricity, bio fuels, fertilizers and petrochemical products• Investment, production and trading renewable energies and other minerals• Provision of petroleum services

ANNUAL REPORT 2011


RELATED BUSINESSES

• Investment, development and operation of ports, maritime shipping, water, road and air transportation, shipping agents

• Survey, design and investment consultancy, construction, operation and repairing of industrial installations and civil facilities; production and trading of construction materials

• Deployment and development of clean energy projects and clean development mechanism (CDM)

• Training and provision of human resources for the oil and gas industry

• Finance, securities, banking and insurance

• Other businesses permitted under the law

PTSC supply base

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OIL AND GAS

EXPLORATION AND

PRODUCTION

REFINERY,

PETROCHEMICAL,

BIO-FUEL

PETROLEUM

SERVICES

POWER

GENERATIONGAS INDUSTRY

ANNUAL REPORT 2011


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OIL AND GAS EXPLORATION AND PRODUCTION

With a view to increasing oil and gas reserve and discovering new fi elds to meet domestic demand and export, Petrovietnam has been carrying out eff ective exploration and production of oil and gas both at home and abroad through PSC, JOC, JOA, BCC contracts, self-investment and self-management in exploration, thus making important petroleum discoveries, quickly bringing the discovered fi elds into production phase with the application of state-of-the-art technologies to increase the production as well as and the oil and gas recovery rate, thus protecting the environment and natural resources.

• Domestic E&P activities: In the year of 2011, Petrovietnam signed six petroleum contracts of blocks 05-2/10 (with PVEP/Talisman), 148-149 (with PVEP), 135-136/03 (with PVEP/Talisman/Pearl), 45 (with Mitra/PVEP), 102/10&106/10 (with PVEP) and 13/05 (with Santos/PVEP), increasing the number of Petrovietnam’s eff ective contracts to 60. In the year under review, Petrovietnam conducted survey and acquisition of over 12,500 km 2D and 5,600 km2 3D seismic in accordance with the signed contracts and general exploration programme for exploration and appraisal of oil and gas potential in structures.

Petrovietnam drilled 72 wells, among them 6 for exploration, 14 for appraisal, 29 production and remainings for water injection and well-to-well connection with the total drilling length of 222,000m at the expense of about 1.160 billion US Dollars. As a results of such exploration – appraisal drilling campaign, several signifi cant oil and gas discoveries were made in wells T-1X, MT-1X (Block 09-1, Vietsovpetro), CVX-2X (Block 117-119, Exxon Mobil) and others, leading to the total recoverable reserve increase by 35 million t.o.e in 2011, thus ensures the reserves increase by 130 to 140 million t.o.e for the period 2011-2015.

• Overseas E&P activities: Implementing the Decision No. 386/QD-TTg dated 9th of March 2006 by the Prime Minister of Vietnam in regards of the vision and primary targets in-overseas investment strategy, in 2011 Petrovietnam signed one new petroleum contract on Block 39 (in Peru), increasing the total number of eff ective exploration and production projects to 20 habouring in 15 countries and territories, including the Russian Federation, SNG countries, Middle East, Northern and Central Africa, Latin America and ASEAN countries.

Generally, in 2011 the E&P activities both in Vietnam and overseas were carried out actively, resulting in various new oil and gas discoveries. The signifi cant investment amounts were attracted for its in-country projects, a number of petroleum contracts were signed, including ones in the deepwater and remote off shore areas. As for its overseas investment strategy, Petrovietnam have gained positive achievements, thus enables to increase the oil and gas reserves and production, contribute considerably to the national energy security of Vietnam and gradually enhance the Group’s position and image in the regional and global arena.

VIET NAM’S PETROLEUM OPERATION MAP

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Oil Producing Fields Contract block Contractor Year

Bach Ho (White Tiger) 09-1 VSP 1986

Rong (Dragon) 09-1 VSP 1994

Dai Hung (Big Bear) 05-1a PVEP POC 1994

Block PM3-CAA (overlapping area between Viet Nam and

Malaysia with 50% interest of Viet Nam)

PM3 - CAA TML 1997

Rang Dong 15-2 JVPC 1998

Ruby 01&02 PCVL 1998

Block 46-CN 46 CN TML 1999

Su Tu Den (Black Lion) 15-1 CLJOC 2003

Cendor PM-304 (Malaysia) Petrofac 2006

Su Tu Vang 15-1 CLJOC 2008

Song Doc 46/02 TSJOC 2008

Ca Ngu Vang 09-2 HVJOC 2008

Phuong Dong 15-2 JVPC 2008

Nam Rong - Doi Moi 09-3 VRJ/VSP 2010

Pearl 01&02 PCVL 2010

Topaz 01&02 PCVL 2010

Su Tu Den Dong Bac 15-1 CLJOC 2010

D30 SK305 (Malaysia) PCPP 2010

North Khoseidaien Nhenhexky (Russian Federation) Rusvietpetro 2010

Dana SK305 (Malaysia) PCPP 2011

Visovoi Nhenhexky (Russian Federation) Rusvietpetro 2011

Te Giac Trang 16-1 HLJOC 2011

Chim Sao 12W POVO 2011


Gas Producing Fields Contract block Contractor Year

Tien Hai C (natural gas) Song Hong basin PVEP SH 1981

D14&Song Tra Ly (natural gas) Song Hong basin PVEP SH 2004

Lan Tay (natural gas) 06.1 TNK Vietnam 2002

Rong Doi/West Rong Doi (natural gas) 11-2 KNOC 2006

Bach Ho & Rong (associated gas) 09-1 VSP 1995

Rang Dong (associated gas) 15-2 JVPC 2001

Phuong Dong (associate gas) 15-2 JVPC 2008

Ca Ngu Vang (associated gas) 09-2 HVJOC 2008

Su Tu Den/Su Tu Vang/Northeast Su Tu Den (associated gas) 15-1 CLJOC 2009

East Bunga Kekwa – Cai Nuoc (natural and associated gas) PM3-CAA & 46-CN TML&TVL 2003

West Bunga Kekwa (natural and associated gas) PM3-CAA TML 2003

Bunga Raya PM3-CAA TML 2003

Bunga Seroja (natural gas) PM3-CAA TML 2003

Bunga Tulip (associated gas) PM3-CAA TML 2006

Bunga Orkid (natural gas) PM3-CAA TML 2008

Te Giac Trang (associated gas) 16-1 HLJOC 2011

Chim Sao (associated gas) 12W POVO 2011

Block SK305 Field in Malaysia (PVEP’ share: 30%) PCPP 2010

PROGRESS OF PUTTING THE FIELDS INTO OPERATION

25

20

15

10

05

00

1981-1985 1986-1990 1991-1995 1996-2000 2001-2005 2006-2010 2011-2015

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REFINERY, PETROCHEMICAL AND BIO-FUEL

Oil and gas processing is one of the key operations of Petrovietnam, contributing signifi cantly to the company’s development and its increasingly high position in the international arena.

Petrovietnam is actively accelerating the progress of implementation of oil refi nery, petrochemical and bio-fuel projects while at the same time study the possibility of expanding and upgrading its existing plants in operation in order to basically meet the demand on oil and gas, petrochemicals and petrochemical materials in the country, further pursuing the strategy and development plan of the Vietnamese petroleum industry.

REFINERY

Operating plants

• Dung Quat Refi nery in Quang Ngai province, the fi rst refi nery in Viet Nam with a processing capacity of 6.5 million tons of crude a year has been in commercial operation since June 2010.

• The Condensate Processing Plant in Ba Ria-Vung Tau province is designed with a processing capacity of 130,000 tons of condensate a year and has been put into operation since 2003, supplying 270,000 tons of gasoline a year.

On-going projects

• The Nghi Son Refi nery and Petrochemicals Complex in Thanh Hoa province is designed with a processing capacity of 10 million tons of imported crude a year and is expected to come into operation in 2015.

Projects under study and calling for investment partners• Upgradate and expansion of the Dung Quat Refi nery in Quang Ngai province to increase its processing

capacity to 2.0 million tons of crude a year and expected to be in operation since 2018.• The Oil Refi nery No. 3 in Long Son of Ba Ria-Vung Tau province with a processing capacity of 10 million tons

of crude a year and expected to be in operation in the 2018-2025 period.

ANNUAL REPORT 2011


PETROCHEMICAL AND BIO-FUEL

Operating plants

• DOP Plant in Dong Nai province with a capacity of 30,000 tons of DOP products a year, in operation since 1997.

• Phu My Fertilizer Plant in Ba Ria-Vung Tau province with a capacity of 740,000 tons of urea from natural gas, in operation since 2004. In 2010, the plant has increased its capacity to 800,000 tons of urea a year.

• Dung Quat Polypropylene in Quang Ngai province with capacity of 150,000 tons of polypropylene products a year, using the propylene materials from Dung Quat Refi nery has been in commercial production since August 2010.

• Ca Mau Fertilizer Plant in Ca Mau province with a capacity of 800,000 tons of urea/year, using natural gas has been in commercial production since early 2012.

• Dinh Vu Polyester Fiber Plant in Hai Phong city with a capacity of 170,000 tons of fi ber a year, using imported materials has been put into commercial production since 2012.

• Bio-fuel Plant in Quang Ngai province with a capacity of 80,000 tons of ethanol /year is put into commercial production in 2012.

On-going projects

• Bio-fuel plants in Phu Tho and Binh Phuoc provinces with a capacity of 80,000 tons of ethanol a year each and are expected to be put into commercial production in 2012.

• Phu My NPK Plant in Ba Ria-Vung Tau province designed with a capacity of 400,000 tons of NPK fertilizers a year is expected to go into commercial production in 2014.

• The South Petrochemical Complex in Ba Ria-Vung Tau province with a processing capacity of 2.7 million tons of feedstock a year including domestic ethane and imported naphtha/propane is expected to be put into commercial production in 2017.

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GAS INDUSTRY

Petrovietnam has been deploying a series of mega-gas projects not only to meet the demand for gas-fired power generation but also to meet the gas demand for the chemical industry, fertilizer production, transportation, industrial production as well as household consumption.

OPERATING GAS PROJECTS

The Cuu Long Basin Gas Pipeline System

The Cuu Long basin gas pipeline system with a capacity of 2 billion m3 gas/year is currently supplying about 1.1 billion m3 of gas/year to the consumers.

The Nam Con Son Gas Pipeline System

Put into operation since 2003 with a capacity of 7 billion m3 of gas/year, the pipeline system composes of about 360km offshore and 40km onshore, the Dinh Co Receiving and Processing Station and the Phu My Distribution Station. The Nam Con Son pipeline system is currently processing and transporting gas from Block 06.1 and Block 11.2 to supply to the power plants and consumers in the Phu My region.

The Phu My - Nhon Trach Gas Pipeline System

Put into operation in 2008 with a transportation capacity of about 2 billion m3 of gas/year, the system is supplying gas to the power plants and industrial zones along its course and at the same time, developing the gas market in Ho Chi Minh City in the future. It also helps connect with the Southwest region of Viet Nam thanks to the pipeline running between Southeast and Southwest regions of Viet Nam.

The Phu My - My Xuan - Go Dau Low-Pressure Gas Pipeline System

Capacitated at 1 billion m3 of gas/year, the system transports gas produced by the Bach Ho and Nam Con Son fi elds from the Phu My Gas Distribution Station (GDS) and the Phu My Gas Distribution Centre (GDC) to the consumers in the Phu My-My Xuan-Go Dau industrial zones. The system has been in operation since 2003.

The Ca Mau - PM3 Gas Pipeline System

The system has a capacity of some 2 billion m3 of gas/ year, transporting the gas from the Block PM3 (overlapping area between Viet Nam and Malaysia) and Block 46-Cai Nuoc to Ca Mau to supply to the Ca Mau Gas-Electricity-Fertilizer Complex. This system has been accomplished and put into operation in May 2007.

ANNUAL REPORT 2011


ON-GOING GAS PROJECTS

The Block B - O Mon Gas Pipeline System

The system has a transportation capacity of around 18.3 million m3 of gas/day (or 6.4 billion m3/year), supplying gas to the Ca Mau Gas-Electricity-Fertilizer Complex and the power plants in O Mon of Can Tho province. The project is expected to be accomplished in 2014.

The Nam Con Son 2 Gas Pipeline Project

The 2-phase pipeline with a designed capacity of 18.4 million m3 of gas and 1,320 tons of condensate/day, will transport gas from the Hai Thach-Moc Tinh fields (of Blocks 05-2 and 05-3), Thien Ung-Mang Cau fields (of Block 04-3) and other gas fields in the Nam Con Son and Cuu Long basins to the shore and supply to the consumers in the Southeast Viet Nam. The project is expected to be completed in early 2014.

The Ca Mau Gas Processing Plant

The project aims at making the optimum production and use of the gas sources in the Southwest Viet Nam, from the Blocks PM3 - CAA, 46-CN, B, 48/95 and 52/97, recovering products of higher value, eff ectively using the gas sources from PM3 - Ca Mau and Block B - O Mon, enhancing the recovery possibility for the 5.1 billion m3 of gas that Petronas has received on Petrovietnam’s behalf since 2003. The project is expected to be completed by 2014.

Gas Import Project

With a view to ensuring the volume of gas supplied to users, Petrovietnam is developing a project on storage and terminal for LNG import.

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POWER GENERATION

In order to meet the electricity demand and contribute to ensuring national energy security, Petrovietnam is investing strongly into power generation and has become the second largest power generator in Viet Nam. To date, Petrovietnam has been tasked with the construction of more than 10 power projects with a total capacity over 10,000 MW. Along with the gas turbine power plants Ca Mau 1 (750MW), Ca Mau 2 (750MW), Nhon Trach 1 (450MW), Nhon Trach 2 (750MW), wind power plant Phu Quy (6MW), hydro power plant Nam Cat (3.2MW) being constructed and put into stable operation, Petrovietnam has launched its project construction for the thermo-power plants such as the Vung Ang 1, Long Phu 1, Thai Binh 2, Quang Trach 1, Song Hau 1, Hua Na and Dakdring hydro-power plants.

OPERATING POWER PLANTS

Plant Capacity (MW) Commence date of operation

Ca Mau 1 750 20/3/2008

Ca Mau 2 750 12/2008

Nhon Trach 1 450 8/2009

Nhon Trach 2 750 16/10/2011

Phu Quy Wind-power 06 III/2012

Nam Cat Hydro-power 3,2 10/5/2012

ON-GOING PROJECTS

Project Capacity (MW) Launching date

Vung Ang 1 Thermo-power 1200 8/2009

Long Phu 1 Thermo-power 1200 5/1/2011

Thai Binh 2 Thermo-power 1200 1/3/2011

Quang Trach 1 Thermo-power 1200 19/7/2011

Song Hau 1 Thermo-power 1200 Expected launch of construction in 2013

Hua Na Hydro-power 180 28/3/2008

Dakdring Hydro-power 125 23/1/2011

ANNUAL REPORT 2011

Workers on Nhon Trach 1

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PETROLEUM SERVICES

Petrovietnam today has become a national multidisciplinary economic group, off ering diverse oil and gas products and services.

Petrovietnam’s petroleum services and diverse businesses are being expanded with the application of state-of-the-art technologies to serve oil and gas operations and facilities at home and abroad. Several petroleum technical services companies have been restructured or newly established for thus purpose

SERVICES OFFERED BY THE COMPANIES OF THE GROUP

• Geo-physics survey, drilling services, oil and gas production, provision of FPSO and FSO vessels, import-export and supply of petroleum materials and equipment

• Import-export and trading of crude oil and petroleum products

• Transportation, storage, supply and distribution of oil and gas products, dry gas and LPG

• Operation and maintenance of oil and gas structures (rigs, oil tankers, crude oil storage vessels, oil and gas pipeline systems, gas processing plants, high buildings...)

• Design and installation of oil and gas structures; civil construction

• Maritime transportation and logistics

• Provision of technical workers, tourism, hotels, catering for off shore oil and gas structures.

ANNUAL REPORT 2011


SERVICE PROVIDING UNITS

Besides, Petrovietnam also has other companies providing such services as insurance, loan and credit arrangement for investment projects, fund and corporate credit mobilisation; provision of fi nancial, stock, securities and energy inspection services. They include:

• Petrovietnam Insurance Joint Stock Corporation (PVI Holdings);

• Petrovietnam Finance Joint Stock Corporation (PVFC);

• Petrovietnam Energy Inspection Joint Stock Corporation (PVEIC);

Participating in research and development as well as training activities, Petrovietnam off ers several institutions providing such services as R&D consultancy, technological research and transfer, application of new technology in oil and gas production, geophysical data processing, quality inspection of oil products under international standards, refi ning technology research, training of petroleum technical staff s, etc. These institutions include:

• Viet Nam Petroleum Institute (VPI) with its several specialised research centres;

• Vietsovpetro Research and Design Institute (NIPI);

• Petrovietnam Manpower Training College (PVMTC);

• Petrovietnam University (PVU).

Petroleum services and multidisciplinary businesses continue to increase, staying for important source of revenues for the Vietnamese oil and gas industry.

Viet Nam - Russia Joint Venture (Vietsovpetro)

Petrovietnam Drilling and Well Services Corporation (PVDrilling)

Petrovietnam Oil Corporation (PVOil)

Petrovietnam Transportation Corporation (PVTrans)

Petrovietnam Construction Corporation (PVC)

Petrovietnam Engineering Joint Stock Company (PVE)

Petrovietnam Technical Services Corporation (PTSC)

Drilling Mud Joint Stock Corporation (DMC)

PETEC Trading and Investment Corporation (PETEC)

Petrovietnam Gas Corporation (PVGas)

Petroveitnam General Service Corporation (Petrosetco)

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PETROVIETNAM26

H.E President Truong Tan Sang awards Ho Chi Minh Medal

SCIENCE AND TECHNOLOGY RESEARCH

AND DEVELOPMENT

Science and technology contribute considerably to making Petrovietnam as strong as today. One of the most important R&D achievements of the Vietnamese oil and gas industry today is the researches on the exploration, discovery and eff ective exploitation of the oil in the tertiary gratinoid basement in the Cuu Long basin, Viet Nam’s continental shelf. With a series of inventions and patents licensed by the Vietnamese National Offi ce of Intellectual Property and the Russian Federation’s Copyright Offi ce, these researches have changed the conventional petroleum exploration and production, and made a new addition to the general theory on oil and gas system, thus creating a turning point for the development of the Vietnamese petroleum industry.

As an industry of high international nature and employing state-of-the-art technologies, Petrovietnam has been expanding its international cooperation on R&D with foreign oil and gas companies, research institutions and universities around the world. It is also strengthening its relations with bilateral and multilateral cooperation organisations like CCOP, ASCOPE, the International Petroleum Geologists Association, etc. in order to improve the capacity of the Vietnamese petroleum R&D and training high-quality R&D staff s.

Also in 2011, Petrovietnam started conducting comprehensively three groups of breakthrough solutions in management, human resources development and science-technology to cope with development acceleration strategy until 2015 and toward 2025. In the science and technology term, the solutions are concentrated on mechanism, policy for the science and technology activities, organization, conduction and implementation of science researches.

Entering the next phase of development, Petrovietnam is to increase its investment in a modern and integrated material and technical infrastructure for the R&D institutions while at the same time, focuses on the successful application of breakthrough R&D solutions to increase productivity, quality and effi ciency in production and business activities to bring about a vertical and sustainable development for Petrovietnam.

. Tam Dao - 03 rig, the rig successfully manufactured by Petrovietnam under the assistance of a State research project on study and design of

90m wate-mark jack-up rig under Vietnamese conditions

PETROVIETNAM


PETROVIETNAM28

TRAINING AND HUMAN RESOURCES DEVELOPMENT

Petrovietnam puts training and human resources development (HRD) as one of its top duties. Petrovietnam has designed and been carrying out a HRD strategy until 2015 with orientation toward 2025 with the application of breakthrough solutions on training and HRD. To attain the goal of reaching the same level of sustainable development at par with other petroleum companies in the region and the world, the staffs of Petrovietnam are being retrained to further build up their capacity on management, profession, skills, foreign languages, IT, etc. at domestic and foreign training facilities.

From the current state of manpower, production and business of the petroleum industry, Petrovietnam is for the development of a system of training facilities at all levels from technical workers, college and university graduates to post-graduates, with focus given to the professions serving the activities of the industry. This system could be described as per the following chart:

Facility Level / Form of training

Petrovietnam Manpower Training Col-lege (PVMTC)

Petroleum professional college Manpower training for project operationTraining on safety and environment in the petroleum industryTraining for international certifi catesRegular training and training for technological transferTraining of foreign languages and ITBasic training for beginners in the industry

Petrovietnam University (PVU) Graduation MA and PhD level trainingRegular training and training for beginners of the industry.

Viet Nam Petroleum Institute (VPI) / Petroleum Academy

Knowledge updating and advanced training for the petroleum industry MA and PhD courses attached to business- and production-led researchesTraining for technological specialists / experts

Training facilities at the subsidiaries Training as per specifi c demand of the subsidiary

ANNUAL REPORT 2011


SAFETY, HEALTH AND ENVIRONMENT POLICIES

Safety, health and environment (SHE) are the prime responsibilities of all levels of management and units in performing production and business tasks. Petrovietnam applies every appropriate measure to mitigate or eliminate risks that might affect the health and life of people or damage the property and environment.

TO ACHIEVE THE ABOVE TARGETS, PETROVIETNAM PLEDGES

• To ensure that all activities, products and services of Petrovietnam and its subsidiaries meet the legal provisions and standards on health, safety and environment;

• To provide the necessary resources, regimes and procedures to establish and maintain the lowest possible level of risks on health, safety and environment;

• To ensure that emergency rescue plan and capacity are developed and maintained to have timely and eff ective responses in emergency cases;

• To train its staff s on safety, health and environment issues in accordance with their duties;

• To conduct regular evaluation and consideration of management and outcomes of safety, health and environment for constant improvement;

• To give priority to and encourage the application of the latest, energy saving and environmental friendly technologies in production and business activities;

• To facilitate the exchange between Petrovietnam and its subsidiaries with the staff s, contractors, clients, suppliers on the improvement of safety, health and environment issues.

Petrovietnam requests its staffs to understand and fully observe these policies in all of their activities. Petrovietnam also hopes that its system of managing its partners’ safety, health and environment activities will be in line with the above-mentioned policy in order to best perform the works on safety, health and environment in the interest of the community and of each side.

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ANNUAL REPORT 2011


INTERNATIONAL COOPERATION

With Viet Nam’s accession to the World Trade Organisation (WTO) in 2007, Vietnamese enterprises are enjoying new opportunities and conditions for stronger international cooperation, allowing their products’ better access to the major markets in the world. Many Vietnamese enterprises are starting to compete with other companies around the globe. At the same time, many countries and foreign businesses operating in different fields are also coming to Viet Nam to explore business opportunities. Petrovietnam is not an exemption. Not only conducting oil and gas cooperation, Petrovietnam also has investment cooperation abroad in oil and gas exploration and production. Among others, one could count such cooperation projects, which have been conducting in Algeria, Cambodia, Malaysia, Myanmar, Russian Federation, Peru or Venezuela, etc. to name but a few. Apart from its overseas exploration and production contracts, Petrovietnam’s international cooperation activities in other areas are also being actively pursued. We have got crude oil and petroleum products trading contracts abroad, hydro-power and mining projects in Laos, etc., which would help meet the domestic and export demands.

Besides, Petrovietnam is now an active member of many regional and international energy organisations like the International Gas Union (IGU), ASEAN Council on Petroleum (ASCOPE), Gas Information Exchange in the Western Pacific Area (GASEX), World Petroleum Council (WPC), etc. It is also actively participating in the trans-ASEAN pipeline project and expanding its cooperation with partners in Africa, the Middle East and Latin America through the conclusion of Memoranda of Understanding (MOUs) with the national petroleum companies of countries having considerable oil and gas potentials like Angola, Mozambique, Sudan, Oman, UAE, Kuwait, Nicaragua, Bolivia or Ecuador, etc. to have concrete contracts in oil and gas exploration and production to diversify the sources of crude and LNG import for the increasing energy demand the county.

PETROVIETNAM


PETROVIETNAM32

SOCIAL RESPONSIBILITY

Along with the acceleration and development of its production and business, Petrovietnam always pays great attention to the furtherance of social security works, considering this as an important political task and responsibility of the company toward the community and society. These activities include the support for the construction of houses for its retired staff s suff ering from diffi cult living conditions, support to the construction of schools and health stations, solidarity houses and houses of gratitude in various localities in the country. Petrovietnam also supports the localities in repairing the damages of natural disasters, earthquakes and fl ooding as well as their course of developing a new rural area. In the recent years, Petrovietnam has contributed in average a sum of over VND 600 billion per year to the social security fund.

In regard to the international community, Petrovietnam staffs always show their timely understanding and sharing of the hardships suffered by the people in foreign countries and territories with a high sense of responsibility.

VIETNAM OIL AND GAS GROUP(Incorporated in the Socialist Republic of Vietnam)

AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011

Hanoi, April 2012

VIETNAM OIL AND GAS GROUP34

TABLE OF CONTENTS

PAGE(S) CONTENTS

35-36 Statement of the Board of Management

37-38 Auditors Report

39-42 Consolidated Balance Sheet

43 Consolidated Income Statement

44 Consolidated Cash Flow Statement

45-80 Notes to the Consolidated Financial Statements


STATEMENT OF THE BOARD OF MANAGEMENT

The Board of Management of Vietnam Oil and Gas Group - Holding Company (“the Company”) presents this report together with the consolidated fi nancial statements of the Company and its subsidiaries (collectively referred to as “the Group”) for the year ended 31 December 2011.

THE BOARDS OF DIRECTORS AND MANAGEMENT

The members of the Boards of Directors and Management of the Company who held offi ce during the year and at the date of this report are as follows:

Board of Directors

Mr. Phung Dinh Thuc Chairman (appointed on 19 September 2011)

Member (held offi ce up to 19 September 2011)

Mr. Dinh La Thang Chairman (left offi ce on 19 September 2011)

Mr. Do Van Hau Member (appointed on 19 September 2011)

Mr. Hoang Xuan Hung Member (retired on 01 April 2012)

Mr. Vu Khanh Truong Member

Mr. Nguyen Thanh Liem Member

Mr. Phan Dinh Duc Member

Mr. Nguyen Xuan Thang Member

Board of Management Mr. Do Van Hau President & CEO (appointed on 19 September 2011)

Vice President (held offi ce up to 19 September 2011)

Mr. Phung Dinh Thuc President & CEO (held offi ce up to 19 September 2011)

Mr. Nguyen Vu Truong Son Vice President (appointed on 01 February 2012)

Mr. Nguyen Quoc Khanh Vice President

Mr. Nguyen Quoc Thap Vice President

Mr. Vu Quang Nam Vice President

Ms. Tran Thi Binh Vice President

Mr. Le Minh Hong Vice President

Mr. Nguyen Tien Dung Vice President

Ms. Pham Thi Thu Ha Vice President

Mr. Nguyen Xuan Son Vice President

Mr. Nguyen Sinh Khang Vice President

BOARD OF MANAGEMENT’ STATEMENT OF RESPONSIBILITY

The Board of Management of the Company is responsible for the preparation of the Group’s consolidated fi nancial statements of each year, which give a true and fair view of the fi nancial position of the Group and of its results and cash fl ows for the year. In preparing these consolidated fi nancial statements, the Board of Management is required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and estimates that are reasonable and prudent;


STATEMENT OF THE BOARD OF MANAGEMENT (cont.)

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the consolidated fi nancial statements;

• prepare the consolidated fi nancial statements on the going concern basis; and

• design and implement an eff ective internal control system for the purpose of properly preparing and presenting the consolidated fi nancial statements so as to minimize errors and frauds.

The Board of Management is responsible for ensuring that the Group’s consolidated fi nancial statements are prepared, which disclose, with reasonable accuracy at any time, the fi nancial position of the Group and that the consolidated fi nancial statements comply with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing relevant regulations in Vietnam. The Board of Management is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of frauds and other irregularities.

The Board of Management confi rms that the Company has complied with the above requirements in preparing the consolidated fi nancial statements.

For and on behalf of the Board of Management,

DO VAN HAU

President & CEO

Hanoi, 27 April 2012


AUDITORS’ REPORT

No.: 1465 /Deloitte-AUDHN-RE

To: The Boards of Directors and Management of Vietnam Oil and Gas Group - Holding Company

We have audited the accompanying consolidated balance sheet of Vietnam Oil and Gas Group - Holding Company (“the Company”) and its subsidiaries (collectively referred to as “the Group”) as at 31 December 2011, the related consolidated statements of income and cash fl ows for the year then ended, and the notes thereto (collectively referred to as “the consolidated fi nancial statements”), as set out from page 39 to page 80. The accompanying consolidated fi nancial statements are not intended to present the fi nancial position, results of operations and cash fl ows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Vietnam.

Respective Responsibilities of the Board of Management and Auditors

As stated in the Statement of the Board of Management on pages 35 and 36, these consolidated fi nancial statements are the responsibility of the Company’s Board of Management. Our responsibility is to express an opinion on the consolidated fi nancial statements based on our audit.

Basis of Opinion

Except for the audit scope limitation discussed in the following paragraph, we have conducted our audit in accordance with Vietnamese Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance that the consolidated fi nancial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall consolidated fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As presented in Notes 8, 13 and 14 of the Notes to the consolidated fi nancial statements, as per the Prime Minister’s Decision on restructuring Vietnam Shipbuilding Industry Group (Vinashin), the Group temporarily recorded the value of construction in progress relating to projects handed over from Vinashin with the value of VND 667,522 million and recorded the same amount payable to Vinashin under other current payables in the consolidated balance sheet. The Group decided to hand over these projects to some of its subsidiaries and associates. Up to 31 December 2011, the Group did not off set an amount of VND 1,265,585 million (2010: VND 3,425,065 million) which had been paid to Vinashin relating to transferring the construction in progress above and was included in other receivables in the consolidated balance sheet. The fi nancial statements of Dung Quat Shipbuilding Industry Company Limited which was handed over from Vinashin were included in the Group’s consolidated fi nancial statements with its total assets and net assets of VND 6,725,131 million and (VND 230,856 million), respectively as at 31 December 2011. At the date of this report, there have been no offi cial documents issued by competent authority concerning the value of construction in progress handed over from Vinashin, value of assets and liabilities of Dung Quat Shipbuilding Industry Company Limited and the Group’s amount payable to Vinashin as well as values of assets transferred by the Group to its entities. Accordingly, we do not express an opinion on the eff ect of the receipt of the assets handed over and subsidiaries transferred from Vinashin on the Group’s consolidated fi nancial statements for the year ended 31 December 2011.

Opinion

In our opinion, except for any necessary adjustments due to the eff ect of the matter stated above, the accompanying consolidated fi nancial statements give a true and fair view of, in all material respects, the fi nancial position of the Group as at 31 December 2011 and the results of its operations and its cash fl ows for the year then ended in accordance with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing relevant regulations in Vietnam.


AUDITORS’ REPORT (cont.)

Opinion (cont.)

Without further qualifying our opinion, we draw the readers attention to the following matters:

• As stated in Note 6 of the Notes to the consolidated fi nancial statements, as at 31 December 2011, the total outstanding credit facilities the PetroVietnam Finance Joint Stock Corporation (a subsidiary) had granted to some entities under the management of Vietnam Shipbuilding Industry Group (Vinashin) amounted to VND equivalent 1,067,927 million, of which VND 1,067,927 million was overdue and to some entities of Vietnam National Shipping Lines (Vinalines) amounted to VND equivalent 1,820,711 million, of which VND 1,746,971 million was overdue. The Group has assessed these credit facilities carefully and believed that the Group would take eff ective measures to manage the credit quality and be able to collect principals and interest incurred in such credit facilities in the coming years. Therefore, the Group has not made a provision for such credit facilities.

• As stated in Note 33 of the Notes to the consolidated fi nancial statements, provision for decommissioning costs for some petroleum fi elds under exploration and production that the Group has an interest in, was not recorded as at 31 December 2011 in accordance with Vietnam Petroleum Law. At the date of this report, decommissioning costs for certain aforesaid petroleum fi elds were not yet determined. The Board of Management has evaluated and believed that the unrecorded amount was not material to the consolidated fi nancial statements for the year ended 31 December 2011.

PHAM HOAI NAM

Deputy GeneralCPA Certifi cate No. D.0042/KTV

For and on behalf of DELOITTE VIETNAM COMPANY LIMITED

27 April 2012Hanoi, S.R. Vietnam

TRAN HUY CONG

Director AuditorCPA Certifi cate No. 0891/KTV


Consolidated Financial Statement

For the year ended 31 December 2011

CONSOLIDATED BALANCE SHEETAs at 31 December 2011

ASSETS Notes 31/12/2011

VND Million

31/12/2010

VND Million

A. CURRENT ASSETS 257,477,023 211,984,566

I. Cash and cash equivalents 5 96,013,979 94,547,936

1. Cash 34,421,062 28,465,665

2. Cash equivalents 61,592,917 66,082,271

II. Short-term fi nancial investments 6 36,951,588 28,184,543

1. Short-term investments 39,178,132 30,100,209

2. Provision for diminution in value of short-term investments

(2,226,544) (1,915,666)

III. Short-term receivables 78,659,033 60,943,111

1. Trade accounts receivable 7 55,170,189 37,829,566

2. Advances to suppliers 8,721,545 11,181,613

3. Receivables from construction contracts under per-centage of completion method

815,185 348,900

4. Other receivables 8 14,359,090 11,926,646

5. Provision for short-term doubtful debts (406,976) (343,614)

IV. Inventories 9 40,345,028 23,634,719

1. Inventories 40,961,399 24,460,951

2. Provision for devaluation of inventories (616,371) (826,232)

V. Other short-term assets 5,507,395 4,674,257

1. Short-term prepayments 533,309 778,601

2. VAT deductibles 3,572,521 2,741,391

3. Taxes and amounts receivable from the State Budget 298,668 216,850

4. Other short-term assets 10 1,102,897 937,415

The notes set out on pages 45 to 80 are an integral part of these consolidated fi nancial statements




CONSOLIDATED BALANCE SHEET (cont.)As at 31 December 2011

ASSETS Notes 31/12/2011

VND Million

31/12/2010

VND Million

B. NON-CURRENT ASSETS 320,124,043 254,075,077

I. Long-term receivables 23,548 16,586

1. Long-term receivables from customers 4,127 3,933

2. Other long-term receivables 20,699 13,015

3. Provision for doubtful long-term debts (1,278) (362)

II. Fixed assets 172,920,400 142,333,841

1. Tangible fi xed assets 11 116,460,348 102,925,023

- Cost- Accumulated depreciation

153,168,660(36,708,312)

129,094,727(26,169,704)

2. Finance lease assets 337,569 105,106


368,995 (31,426)

111,194(6,088)

3. Intangible fi xed assets 12 2,951,619 1,589,649


3,380,134 (428,515)

1,904,271(314,622)

4. Construction in progress 13 53,170,864 37,714,063

III. Investment property 429,325 365,920


455,080(25,755)

375,342(9,422)

IV. Long-term fi nancial investments 46,667,551 42,736,790

1. Investments in associates 14 5,197,712 5,250,053

2. Interests in joint ventures 15 14,311,465 11,225,756

3. Other long-term investments 16 27,436,221 26,499,479

4. Provision for diminution in value of long-term fi nancial investments

(277,847) (238,498)

V. Other long-term assets 98,962,975 67,435,429

1. Long-term prepayments 17 57,263,040 41,560,068

2. Deferred tax assets 31 318,332 256,966

3. Exploration expense 18 17,959,899 17,795,958

4. Development expense 19 23,037,521 7,686,321

5. Other long-term assets 384,183 136,116

VI. Goodwill 1,120,244 1,186,511

TOTAL ASSETS 577,601,066 466,059,643






RESOURCES Notes 31/12/2011

VND Million

31/12/2010

VND Million

A. LIABILITIES 286,817,642 215,114,138

I. Current liabilities 184,257,396 130,093,1551. Short-term loans and liabilities 20 79,510,280 50,507,527

2. Trade accounts payable 36,548,518 28,123,524

3. Advances from customers 5,043,422 2,987,499

4. Taxes and amounts payable to the State Budget 21 31,645,423 21,819,683

5. Payables to employees 1,683,681 1,145,161

6. Accrued expenses 22 14,526,367 11,239,653

7. Payables relating to construction contracts under percentage of completion method

72,259 -

8. Other current payables 23 13,190,774 12,562,394

9. Short-term provisions 1,483,641 1,244,923

10. Bonus and welfare funds 553,031 462,791

II. Long-term liabilities 102,560,246 85,020,9831. Other long-term payables 1,876,019 522,552

2. Long-term loans and liabilities 24 90,727,866 75,931,873

3. Deferred tax liabilities 31 6,475,607 5,787,014

4. Provision for severance allowance 97,279 104,926

5. Long-term provisions 248,035 599,756

6. Unearned revenue 992,899 457,460

7. Scientifi c and technological development fund 1,910,426 1,092,642

8. Oil price stabilization fund 232,115 524,760

B. EQUITY 25 263,800,964 232,365,842

I. Owner’s equity 263,707,135 232,133,5681. Owner’s contributed capital 177,628,384 177,628,384

2. Other owner’s capital 13,689,094 5,544,909

3. Assets revaluation reserve - 6,710,920

4. Foreign exchange reserve (2,339,820) (228,799)

5. Investment and development fund 18,814,677 9,129,623

6. Financial reserve fund 17,738,121 16,773,142

7. Other owner’s fund 11,333,746 10,449,238

8. Retained earnings 21,146,718 3,139,768

9. Construction fund 658,676 659,902

10. Enterprise reorganization support fund 5,037,539 2,326,481

II. Other resources and funds 93,829 232,2741. Subsidised fund 408 78,292

2. Funds for fi xed asset acquisition 93,421 153,982

C. MINORITY INTERESTS 26,982,460 18,579,6631. Minority interests 26,982,460 18,579,663

TOTAL RESOURCES 577,601,066 466,059,643






OFF BALANCE SHEET ITEMS Unit 31/12/2011 31/12/2010

1. Materials, goods held under trust or for processing VND Million 1,822,544 1,026,818

2. Bad debts written off VND Million 17,394 171,775

3. Foreign currencies

United States Dollar USD 301,656,862 715,834,918

Euro EUR 173,057 20,494,329

Great Britain Pound GBP 1,607 7,866,320

Norwegian Krone NOK 3,658 805,794

Singaporean Dollar SGD 30,812 686,881

Algerian Dinar DZD 50,384,373 56,305

Japanese Yen JPY - 1,333


Do Van Hau

President & CEO


Ninh Van Quynh

Chief Accountant General Manager - Finance & Accounting Division




CONSOLIDATED INCOME STATEMENTAs at 31 December 2011

ITEMS Notes 2011

VND Million

2010

VND Million

1. Gross sales 26 332,003,707 241,459,395

2. Less deductions 26 7,248,371 6,628,854

3. Net sales 26 324,755,336 234,830,541

4. Cost of sales 26 262,459,320 186,756,876

5. Gross profi t from sales 62,296,016 48,073,665

6. Financial income 27 15,513,766 13,329,512

7. Financial expenses 28 13,832,349 8,649,534

8. Selling expenses 4,759,834 3,405,111

9. General and administration expenses 9,215,855 6,368,880

10. Operating profi t 50,001,744 42,979,652

11. Other income 6,116,704 1,708,635

12. Other expenses 4,434,869 681,609

13. Profi t from other activities 29 1,681,835 1,027,026

14. Share of net profi ts of associates and joint ventures 2,150,388 498,114

15. Accounting profi t before tax 53,833,967 44,504,792

16. Current corporate income tax expense 30 18,773,042 14,727,938

17. Deferred corporate income tax expense 31 677,087 199,032

18. Net profi t after corporate income tax

Attributable to:

34,383,838 29,577,822

Equity holders of the Group 30,458,429 26,912,126

Minority interests 3,925,409 2,665,696


Do Van Hau

President & CEO


Ninh Van Quynh





CONSOLIDATED CASH FLOW STATEMENTAs at 31 December 2011

ITEMS 2011

VND Million

2010

VND Million

CASH FLOWS FROM OPERATING ACTIVITIES

Profi t before tax 53,833,967 44,504,792

Adjustments for:

- Depreciation and amortisation 10,765,426 8,094,967

- Allocations of exploration and development expenses 8,273,174 5,145,420

- Provisions 204,644 706,140

- (Gain) from fi xed assets disposal (743,834) (72,184)

- Unrealized foreign exchange loss 183,546 1,283,087

- (Gain) from investing activities (11,890,430) (8,061,697)

- Interest expense 4,512,936 2,495,240

Operating profi t before movements in working capital 65,139,429 54,095,765

- Changes in receivables (18,865,590) (16,385,240)

- Changes in inventories (16,500,448) (2,981,032)

- Changes in accounts payable 27,906,110 28,893,484

- Changes in prepaid expenses (998,186) (2,175,586)

- Interest paid (4,777,389) (1,708,051)

- Corporate income tax paid (17,461,768) (13,294,139)

Net cash from operating activities 34,442,158 46,445,201

CASH FLOWS FROM INVESTING ACTIVITIES

1. Acquisition and construction of fi xed assets and other long-term assets (43,090,588) (42,319,526)

2. Proceeds from sales and disposal of fi xed assets 2,923,051 220,825

3. Changes in investments (10,897,647) (2,754,128)

4. Loan interest earned, dividends, and profi ts received 9,639,421 7,411,210

5. Investment in petroleum exploration and development (31,658,321) (18,950,878)

Net cash (used in) investing activities (73,084,084) (56,392,497)

CASH FLOWS FROM FINANCING ACTIVITIES

1. Capital proceeds by the State Budget 3,500,000 7,055,387

2. Proceeds from borrowings 121,241,657 57,329,645

3. Repayment of borrowings (84,633,688) (31,352,648)

4. Cash balances of PETEC transferred from the Ministry of Industry and Trade and Dung Quat Shipbuilding Industry Co., Ltd. transferred from Vinashin

- 668,082

5. Proceeds from subsidiaries’ equitization - 2,332

Net cash from fi nancing activities 40,107,969 33,702,798

Net increase in cash 1,466,043 23,755,503

Cash and cash equivalents at the beginning of the year 94,547,936 70,792,433

Cash and cash equivalents at the end of the year 96,013,979 94,547,936


Do Van Hau

President & CEO Hanoi, 27 April 2012

Ninh Van Quynh

Chief AccountantGeneral Manager - Finance & Accounting Division

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (cont.)These notes are an integral part of and should be read in conjunction with the accompanying consolidated fi nancial statements

1. GENERAL INFORMATION

Vietnam Oil and Gas Group - Holding Company and its subsidiaries (collectively referred to as “the Group”) were established based on the reorganization of Vietnam Oil and Gas Corporation and its member companies under Decision No. 198/2006/QD-TTg dated 29 August 2006 issued by the Prime Minister.

Vietnam Oil and Gas Group - Holding Company (referred to as “the Company”) is a State-owned company and a legal entity established under Decision No. 199/2006/QD-TTg dated 29 August 2006 issued by the Prime Minister.

On 18 June 2010, the Prime Minister issued Decision No. 924/QD-TTg to transform Vietnam Oil and Gas Group - Holding Company into One Member Limited Liability Company wholly owned by the State, which is eff ective from 01 July 2010. The charter capital of the Company at the transformation date was VND 177,628,383,625,944.

The principal business activities of the Group are: − Research, exploration, production, transportation, processing, storage, distribution and services relating to oil

and gas; − Trading of petroleum materials and equipment, petroleum products and petrochemical materials; − Survey, design, construction and repair of works and facilities for civil use and for petroleum industry; − Investment, generation and trading of electricity;− Financial, stocks, banking and insurance services;− Other business activities permitted by laws.

2. ACCOUNTING CONVENTION AND ACCOUNTING PERIOD

Accounting convention The accompanying consolidated fi nancial statements, expressed in Vietnamese Dong (VND), are prepared under the historical cost convention and in accordance with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing relevant regulations in Vietnam.

The accompanying consolidated fi nancial statements are not intended to present the fi nancial position, results of operations and cash fl ows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Vietnam. Nevertheless, the consolidated fi nancial statements have been translated from those issued in Vietnam, from the Vietnamese language into the English language.

Accounting periodThe Group’s fi nancial year begins on 01 January and ends on 31 December.

3. ADOPTION OF NEW ACCOUNTING GUIDANCE

On 06 November 2009, the Ministry of Finance issued Circular No. 210/2009/TT-BTC (“Circular 210”) guiding the application of International Financial Reporting Standards on presentation of fi nancial statements and disclosures of fi nancial instruments. The adoption of Circular 210 requires disclosures of certain fi nancial instruments as well as the eff ect thereof on the fi nancial statements. This Circular is eff ective for the fi nancial year ending on or after 31 December 2011. The Group has adopted Circular 210 and additional notes on this application to the consolidated fi nancial statements for the year ened 31 December 2011 are set out in Note 34.





4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The signifi cant accounting policies, which have been adopted by the Group in the preparation of these consolidated fi nancial statements, are as follows:

Estimates

The preparation of consolidated fi nancial statements in conformity with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing relevant regulations in Vietnam requires management to make estimates and assumptions that aff ect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the consolidated fi nancial statements and the reported amounts of revenues and expenses during the fi nancial year. Actual results could diff er from those estimates.

Basis of consolidation

The consolidated fi nancial statements incorporate the fi nancial statements of Vietnam Oil and Gas Group - Holding Company and those of enterprises controlled by the Group (its subsidiaries) up to 31 December each year. Control is achieved where the Group has the power to govern the fi nancial and operating policies of an investee enterprise so as to obtain benefi ts from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group. Significant inter-company transactions and balances between group enterprises are eliminated on consolidation.

Minority interests in the net assets of consolidated subsidiaries are identifi ed separately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Business combinations

On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifi able net assets acquired is recognised as goodwill. Any defi ciency of the cost of acquisition below the fair values of the identifi able net assets acquired is credited to profi t and loss in the period of acquisition.

Minority interest is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Goodwill

Goodwill represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is recognised as an asset and is amortised on the straight-line basis over its estimated period of benefi t of 10 years.

Goodwill arising on the acquisition of an associate is included within the carrying amount of the associate. Goodwill arising on the acquisition of subsidiaries and jointly controlled entities is presented separately as an intangible asset in the consolidated balance sheet.





On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of unamortised goodwill is included in the determination of the profi t or loss on disposal.

Financial instruments

Initial recognition

Financial assets

At the date of initial recognition, fi nancial assets are recognized at cost plus transaction costs that are directly attributable to the acquisition of the fi nancial assets.

Financial assets of the Group comprise cash and cash equivalents, short-term and long-term investments, trade receivables and other receivables, and other fi nancial assets.

Financial liabilities

At the date of initial recognition fi nancial liabilities are recognized at cost net of transaction costs that are directly attributable to the issue of the fi nancial liabilities.

Financial liabilities of the Group comprise trade payables and other payables, accrued expenses, debts and borrowings, and other fi nancial liabilities.

Re-measurement after initial recognition

Currently there are no requirements for the re-measurement of the fi nancial instruments after initial recognition.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignifi cant risk of changes in value.

Short-term investments

Short-term investments comprise time deposits with a term exceeding three (03) months, short-term trust investments and other short-term investments. Short-term investments are carried at cost less provision for diminution in value of short-term investments (if any).

Provision for doubtful debts

Provision for doubtful debts is made for receivables that are overdue for six months or more, or when the debtor is in dissolution, in bankruptcy, or is experiencing similar diffi culties and so may be unable to repay the debt.

Cash advance in petroleum contracts

Cash advance in petroleum contracts presents amounts receivable from or payable to joint operating companies in petroleum contracts at the date of the consolidated balance sheet.

According to terms and conditions of production sharing contracts (PSCs) and joint operating contracts (JOCs), every month joint operating companies request petroleum contractors involved in the contracts to make an advance payment for estimated expenses to be incurred in the subsequent period based on the approved work program and budget.

Assets acquired or expenses incurred under the contracts are recorded in appropriate items in the Group’s consolidated fi nancial statements and the cash advance in petroleum contracts is off set by respective amounts.





Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and where applicable, direct labor costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.

As at the balance sheet date, the value of work in progress relating to refi ned petroleum products of Binh Son Refi nery and Petrochemical Co., Ltd. is determined based on the value of crude oil used in a month. Production cost for each type of refi ned petroleum products is determined based on allocation of expenses actually incurred for monthly production units and average selling price (not including additional tax charge and special consumption tax) of each type of refi ned petroleum product. At the date of these consolidated fi nancial statements, the Group has been preparing to submit to the Ministry of Finance the proposal of product unit cost calculating method to determine the value of work in progress as mentioned above.

The evaluation of necessary provision for inventory obsolescence follows current prevailing accounting regulations which allow provisions to be made for obsolete, damaged, or sub-standard inventories and for those which have costs higher than net realisable values as at the balance sheet date.

Tangible fi xed assets and depreciation

Tangible fi xed assets are stated at cost less accumulated depreciation.

The costs of purchased tangible fi xed assets comprise their purchase prices and any directly attributable costs of bringing the assets to their working conditions and locations for their intended use.

The costs of tangible fi xed assets formed from construction investment by contractual mode or self-construction or self-generating process are the settled costs of the invested construction projects in accordance with the prevailing State’s regulations on investment and construction management, directly-related expenses and registration fee (if any). In the event the construction project has been completed and put into use but the settled costs thereof have not been approved, the cost of tangible fi xed assets is recognized at the estimated cost based on the actual cost incurred. The estimated cost will be adjusted according to the settled costs approved by competent authorities.

Tangible fi xed assets are depreciated using the straight-line method using the following annual depreciation rate (%):

Depreciation rates (%)

Buildings and structures 2 - 33

Machinery and equipment 3 - 33

Vehicles and ships 4 - 50

Management tools and equipment 10 - 33

Others 5 - 33

Tangible fi xed assets are revalued in accordance with the State’s decisions or when state-owned enterprises are equitized. The cost and accumulated depreciation of tangible fi xed assets are adjusted based on the revaluation value approved by competent authorities as regulated.

Loss or gain resulting from sales and disposals of tangible fi xed assets is the diff erence between proceeds from sales or disposals of assets and their residual values and is recognised in the consolidated income statement.





Leasing

Leases are classifi ed as fi nance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classifi ed as operating leases.

Rental income from operating leases is recognised on the straight-line basis and in accordance with the lease agreement. Rentals payable under operating leases are charged to the consolidated income statement on the straight-line basis and in accordance with the lease agreement. Benefi ts received and receivable as an incentive to enter into an operating lease are also spread in accordance with the lease agreement.

Intangible fi xed assets and amortisation

Intangible fi xed assets comprise land use rights and other intangible fi xed assets that are stated at cost less accumulated amortisation and amortised using the straight-line method over their estimated useful lives

Construction in progress

Properties in the course of construction for production, rental and administrative purposes or for other purposes are carried at cost. The cost includes any costs that are necessary to form the asset including construction cost, equipment cost, other costs and related borrowing costs in accordance with the Group’s accounting policy. Such costs will be included in the estimated costs of the fi xed assets (if settled costs have not been approved) when they are put into use.

According to the State’s regulations on investment and construction management, the settled costs of completed construction projects are subject to approval by appropriate level of competent authorities. The fi nal costs of these completed construction projects may vary depending on the fi nal approval by competent authorities.

Investment property

Investment properties, which are composed of land use rights and buildings and structures held by the Group to earn rentals or for capital appreciation or both, are stated at cost less accumulated depreciation. Investment properties are depreciated using the straight-line method over their estimated useful lives.

Investments in associates

An associate is an entity over which the Group has signifi cant infl uence and that is neither a subsidiary nor an interest in joint venture. Signifi cant infl uence is the power to participate in the fi nancial and operating policy decisions of the investee but not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these consolidated fi nancial statements using the equity method of accounting. Interests in associates are carried in the consolidated balance sheet at cost as adjusted by post-acquisition changes in the Group’s share of the net assets of the associate. Losses of an associate in excess of the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate) are not recognised.

Interests in joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, i.e, the strategic fi nancial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control.

Where a group entity undertakes its activities under joint venture arrangements directly, the Group’s share of jointly controlled assets and any liabilities incurred jointly with other ventures are recognised in the fi nancial statements of the relevant entity and classifi ed according to their nature. Liabilities and expenses incurred directly in respect of





interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group’s share of the output of jointly controlled assets, and its share of joint venture expenses, are recognised when it is probable that the economic benefi ts associated with the transactions will fl ow to/from the Group and their amount can be measured reliably.

Joint venture arrangements that involve the establishment of a separate entity in which each venture has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using the equity method of accounting.

For the joint venture in Vietnam - Russia Vietsovpetro Joint Venture, interest in joint venture is recorded at cost and share of net profi t (loss) of the joint venture is not recorded in the Group’s consolidated income statement based on Decree No. 142/2007/ND-CP dated 05 September 2007 concerning the promulgation of Financial Regulations applicable to Vietnam Oil and Gas Group - Holding Company (Note 15).

Any goodwill arising on the acquisition of the Group’s interest in a jointly controlled entity is accounted for in accordance with the Group’s accounting policy for goodwill arising on the acquisition of a subsidiary.

Other long-term investments

Other long-term investments comprise investments in shares, bonds, other funds and projects, investments in other entities of which the Groups holds less than 20% of the charter capital, equivalent to voting power proportion and long-term loans, trust investments. These investments are carried at cost and are then measured at cost less provision for diminution in value of long-term investments. Such provision is made as regulated for each type of investment and equals a diff erence between recoverable net value of the investment and initial cost recognition.

Exploration expense

Petroleum exploration expenses include all direct and indirect expenses incurred related to petroleum exploration activities per each petroleum contract or each petroleum exploration area (if self-conducted).

Once petroleum exploration period has ended without any commercial discovery declared, it is dependent upon decision on investment in the exploration area, the Group may charge those related exploration expenses against exploration fund; reduce fi nancial reserve fund or allocate them to the Group’s income statement for the period up to fi ve years since the end of the project.

Unless otherwise required by the State, exploration expenses of petroleum contracts or of areas with commercial discovery declared will be collected and transferred to “long-term prepayments” and then allocated into expenses based on total estimated production volume of an oil fi eld within the term of the petroleum contracts.

Where petroleum exploration is conducted as a basic geological inspection of mineral resources and funded by non-business expenditure sources, such expenses will be fi nalised and off set against the funding in accordance with prevailing fi nancial regulations.

Development expense in petroleum contracts

Development expenses include all direct and indirect expenses incurred in the year related to development activities within the area and system of oil and gas production, processing and transporting. Development expenses incurred under petroleum contracts are separated by each contract.

Those development expenses will be transferred to “long-term prepayments” and allocated to petroleum production costs based on total estimated production volume of an oil fi eld within the term of the petroleum contracts.





Long-term prepayments

Long-term prepayments comprise approved exploration and development expenses incurred under petroleum contracts with commercial discovery declared and other types of long-term prepayments.

The long-term prepayments representing exploration and development expenses as stated above are allocated to expense based on the proportion of amount of production in the period and total estimated production volume of an oil fi eld within the term of the petroleum contracts.

Periodically, the total estimated production volume of an oil fi eld within the term of the petroleum contracts are reviewed by the Group. In a case where there is a change in the reserve, the Group will adjust the allocation rate of exploration expenses and development expenses for the subsequent reporting period, accordingly. The reserves’ quantity has been internally estimated by the Group. However, there have been no offi cial documents prepared by independent parties affi rming the remainder of the reserves of oil fi elds that the Group has an interest in.

Scientifi c and technological development fund

Scientifi c and technological development fund is reserved to form an investment source fi nancing the Group„s scientifi c and technological research. This fund is established based on appropriation of not greater than 10% taxable income before calculating corporate income tax and is recognized in operating results of the year.

Revenue recognition

Revenue from the sale of goods is recognised when all fi ve (05) following conditions are satisfi ed:

(a) the Group has transferred to the buyer the signifi cant risks and rewards of ownership of the goods;

(b) the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor eff ective control over the goods sold;

(c) the amount of revenue can be measured reliably;

(d) it is probable that the economic benefi ts associated with the transaction will fl ow to the Group; and

(e) the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue of a transaction involving the rendering of services is recognised when the outcome of such transactions can be measured reliably. Where a transaction involving the rendering of services is attributable to several periods, revenue is recognised in each period by reference to the percentage of completion of the transaction at the balance sheet date of that period. The outcome of a transaction can be measured reliably when all four (04) following conditions are satisfi ed:

(a) the amount of revenue can be measured reliably;

(b) it is probable that the economic benefi ts associated with the transaction will fl ow to the Group;

(c) the percentage of completion of the transaction at the balance sheet date can be measured reliably; and

(d) the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date. The proportion normally measures that contract costs incurred for work performed to date bear to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the





extent of contract costs incurred that are probable of recovery. Contract costs are recognised as expenses in the period in which they are incurred. Where it is probable that the total contract cost will exceed total contract revenue, the expected loss is recorgnised as an expense immediately as an allowance for foreseeable loss.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the applicable interest rate.

Dividend income from investments is recognised when the Group’s right to receive payment has been established.

Foreign currency translation

The individual fi nancial statements of each entity are presented in the currency of the primary economic environment in which the entity operates (the functional currency). For the purpose of the consolidated fi nancial statements, the results and fi nancial position of each entity are expressed in VND, which is the functional currency of the Group and the presentation currency for the Group’s consolidated fi nancial statements.

For the purpose of presenting consolidated fi nancial statements, the assets and liabilities in subsidiaries’ fi nancial statements presented in foreign currencies are translated to VND using exchange rates prevailing on the consolidated balance sheet date. Income and expense items are translated at the average exchange rates for the year, unless exchange rates fl uctuated signifi cantly during that year, in which case the exchange rates at the dates of the transactions are used. Exchange diff erences arising, if any, are classifi ed as equity and transferred to the Group’s foreign exchange diff erence. Such translation diff erences are recognised in profi t or loss in the period in which the subsidiary is disposed of.

Recording of foreign exchange diff erence at project management boards of Vietnam Oil and Gas Group - Holding Company

The foreign exchange diff erences incurred at project management boards of Vietnam Oil and Gas Group - Holding Company mainly related to construction projects under development, which shall be transferred to the Group’s subsidiaries upon the completion and be recorded in the subsidiaries’ income statement within 5 years from the date of transfer as approved in the Ministry of Finance’s Offi cial Letter No. 6750/BTC-CDKT dated 28 May 2010. As at 31 December 2011, exchange gain recorded in Owner’s equity in the consolidated balance sheet was VND 1,132,488 million. In accordance with Vietnamese Accounting Standard No. 10 “Eff ects of changes in foreign exchange rates” and Circular No. 201/2009/TT-BTC dated 15 October 2009 issued by the Ministry of Finance; for enterprises having their commercial operation, foreign exchange diff erences are allocated to the income statement. The Board of Management believed that such accounting of foreign exchange diff erences is appropriate to the nature of economic transactions and gives a more appropriate view of economic relationship between Vietnam Oil and Gas Group - Holding Company and its subsidiaries.

Recording of foreign exchange diff erence in other cases

The Group applied the method of recording foreign exchange diff erences in accordance with Circular No. 201/2009/TT-BTC issued by the Ministry of Finance on 15 October 2009.

Accordingly, transactions arising in foreign currencies are translated at exchange rates ruling at the transaction date. Foreign exchange diff erences arising from these transactions are recognised in the consolidated income statement.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the rates of exchange prevailing on the balance sheet date and are accounted as follows:

- Foreign exchange diff erences arising from revaluation of monetary items, short-term receivables and short-term payables denominated in foreign currencies at the balance sheet date are recorded in the balance sheet in the “foreign exchange reserve” item under the Owner’s equity section.

- Foreign exchange diff erences arising from revaluation of long-term receivables and long-term payables are recorded in the income statement for the year.





For newly-established subsidiaries that have not yet commenced commercial operation, exchange diff erences which incurred in the year and are retranslated at the balance sheet date are allocated to the income statement for a period up to 5 years since the date of putting construction in use.

The recognition of foreign exchange diff erences in accordance with Circular No.201/2009/TT-BTC diff ers from that as regulated in Vietnamese Accounting Standard No. 10 (VAS 10) “Eff ects of changes in foreign exchange rates”. According to VAS 10, all foreign exchange diff erences arising from revaluation of balances denominated in foreign currencies at the balance sheet date are recognized in the income statement. The Board of Management has decided to recognise foreign exchange diff erences as guided in Circular No.201/2009/TT-BTC and believes that such application and disclosure of diff erences at the same time, in the case where the Group would apply VAS 10, may provide more information to users of the consolidated fi nancial statements. Accordingly, the adoption of Circular No.201/2009/TT-BTC in recording foreign exchange diff erences makes the Group’s profi t before tax for the year ended 31 December 2011 increase by VND 2,454,336 million and the “Foreign exchange reserve” item under Owner’s equity section in the consolidated balance sheet as at 31 December 2011 decrease by the same amount in comparison with the VAS 10 adoption.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the cost of those assets.

Borrowing costs related to interest in the petroleum contracts and other borrowing costs are recognised in the consolidated income statement when incurred.

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the management’s best estimate of the expenditure required to settle the obligation at the balance sheet date.

Taxation

Profi t tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profi t for the year. Taxable profi t is calculated based on results of the year after having made adjustments to ineligible or non-deductible items. The current tax liabilities are calculated using tax rates which have been enacted or substantively enacted by the consolidated balance sheet date. Applicable income tax rates are 28% - 50% depending on contracts’ terms and conditions and tax rates fi xed for each oil and gas block in accordance with regulation of the Ministry of Finance for crude oil production activities (except for petroleum blocks located outside Vietnam, in which case corporate income tax is 0%) and 10% - 25% for other activities.

Income taxes on crude oil and gas production under production sharing contracts are determined according to contract terms and conditions. Income taxes on other activities are paid in compliance with prevailing tax laws in Vietnam.

Deferred tax is recognised on signifi cant diff erences between carrying amounts of assets and liabilities in the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all temporary diff erences and deferred tax assets are recognised to the extent that it is probable that taxable profi t will be available against which deductible temporary diff erences can be utilised.

Other taxes are paid in accordance with the prevailing tax laws in Vietnam.





Related party

A related party is where one party has either controlling power or signifi cant infl uence over the other party in terms of fi nancial and operating policy decision-making. Related parties which make transactions with the Group mainly include groups, corporations which are also State-owner and the Group’s joint ventures and associates.

However, all companies whose owner is the State or governing power is held by the State are not necessarily related parties. In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.

5. CASH AND CASH EQUIVALENTS

31/12/2011

VND Million

31/12/2010

VND Million

Cash on hand 158,950 113,217

Cash in bank 34,259,929 28,327,225

Cash in transit 2,183 25,223

Cash equivalents (*) 61,592,917 66,082,271

96,013,979 94,547,936

(*) Cash equivalents represent the Group’s time deposits with terms of less than or equal to three (3) months at commercial banks and fi nancial institutions.

6. SHORT-TERM FINANCIAL INVESTMENTS

31/12/2011

VND Million

31/12/2010

VND Million

Time deposits with a term of over 3 months 6,271,924 7,663,589

Other short-term investments (*) 32,906,208 22,436,620

Provision for diminution in value of short-term investments (2,226,544) (1,915,666)

36,951,588 28,184,543

(*) Other short-term investments present investments in listed stocks, capital share, government bonds and other investments that are expected to provide the Group with future benefi t through dividend income or trading gains and loans which will mature within one year.

As at 31 December 2011, the total outstanding credit facilities the Group had granted to some entities of Vietnam Shipbuilding Industry Group (Vinashin) amounted to VND equivalent 1,067,927 million, of which VND 1,067,927 million was overdue and some entities of Vietnam National Shipping Lines (Vinalines) amounted to VND equivalent 1,820,711 million, of which VND 1,746,971 million was overdue. The Board of Management assessed the situation carefully and believed that the Group would take eff ective measures to manage the credit quality and to collect principals and interest in full in the coming years. Therefore, the Group did not record a provision for such credit facilities.





7. TRADE ACCOUNT RECEIVABLES

31/12/2011

VND Million

31/12/2010

VND Million

Trading and distribution 13,337,505 13,747,037

Electricity generating (*) 13,326,337 4,956,555

Petroleum-based products 8,315,499 1,387,021

Gas collection and processing 6,193,802 5,021,593

Crude oil production 4,249,975 4,416,627

Construction and engineering 2,908,929 2,110,761

Drilling services 1,782,454 1,830,098

Ship and port services 1,639,236 1,111,317

Gas and condensate production 697,091 197,758

Financial services 598,952 677,237

Fertilizer production 149,368 72,998

Others 1,971,041 2,300,564

55,170,189 37,829,566

(*) As at 31 December 2011, receivables from electricity generating mainly presented VND 13,318,656 million receivable from Vietnam Electricity Group (EVN), of which VND 1,181,515 million was overdue for more than 1 year. The Board of Management believed that the receivables from EVN would be collected and therefore, the Group did not record a provision for such doubtful debts.

8. OTHER RECEIVABLES

31/12/2011

VND Million

31/12/2010

VND Million

Interest income on bank deposits and trusted funds 1,745,576 1,230,194

Receivables from transfering shares and valuable papers 1,606,984 827,924

Receivables from Vietnam Shipbuilding Industry Group (*) 1,265,585 3,103,962

Receivables from Electricity Power Trading Company (EPTC) (**) 1,061,493 -

Cash advance for petroleum contracts 816,650 583,762

Receivables from deposits, guarantee fees 777,188 105,428

Receivables from business co-operation 667,768 63,538

Financial aid for comprehensive clean energy and light project 404,974 351,474

Receivable from trust loans through Ocean Bank 378,036 644,153

Receivables relating to temporary import for re-exported goods 357,763 399,723

Advance for non-business organizations’ activities 344,694 413,494

Receivables from partners for capital contribution to PVTex Dinh Vu 328,094 318,520

Receivable from Vietnam National Shipping Lines 322,200 322,200

Pending debts covered by secured assets 289,311 -

Receivables from compensation 274,312 80,964

Receivables relating to liabilities settled 253,856 253,856

Receivables from operations of petroleum blocks 225,083 293,179

Receivables from joint ventures interest 200,820 96,356

Receivables from Lam Kinh Hotel Joint Stock Company 200,000 -

Receivable from S.S.G Group Joint Stock Company 188,293 198,270

Receivables from the State Bank of Vietnam relating to interest support program 179,319 147,420





Receivables from Block B - O Mon Pipeline Operating Company 171,686 295,068

Receivables from scientifi c research contracts 128,859 79,368

Receivables from State Budget for the road construction in Dung Quat 122,903 151,703

Receivables from Ministry of Transport 112,788 -

Receivables from Idemitsu Petroleum Company 112,462 -

Receivables from joint operating companies for taxes - paid on behalf - 68,703

Others 1,822,393 1,897,387

14,359,090 11,926,646

(*) Include therein receivables arising from the payment made by the Group to Vietnam Shipbuilding Industry Group (Vinashin) relating to the projects/entities handed over from Vinashin. Up to 31 December 2011, the Group off set against the amout paid to Vinashin corresponding to the liability of VND 2,226,553 million incurred by Dung Quat Shipbuilding Industry Company Limited. The remaining receivable which was not off set with Vinashin amounted to VND 1,265,585 million were presented as other receivables in the consolidated balance sheet.

(**) Sales of electricity receivable from Electricity Power Trading Company (EPTC) up to 31 December 2011 were not invoiced by the Group, and were determined based on the minutes of negotiation agreement on the conditions and terms of electricity sale contracts applied for commercial operation period of Nhon Trach 2 combined-cycle power plant on signed between EPTC and PetroVietnam Nhon Trach 2 Power Joint Stock Company 23 December 2011. This electricity sales includes estimated electricity revenues of VND 951 billion and respective value added tax of VND 95 billion.

9. INVENTORIES

31/12/2011

VND Million

31/12/2010

VND Million

Raw materials 12,236,751 8,115,206

Work in progress 13,465,249 6,703,797

Merchandise 7,619,806 5,021,565

Goods in transit 2,801,843 2,427,792

Finished goods 4,378,952 2,048,247

Tools and supplies 101,670 81,608

Goods on consignment 357,128 62,736

40,961,399 24,460,951 Provision for devaluation of inventories (616,371) (826,232)

Net realisable value 40,345,028 23,634,719

10. OTHER SHORT-TERM ASSETS

31/12/2011

VND Million

31/12/2010

VND Million

Short-term deposits, mortgages, collaterals 624,621 670,161

Advance 418,972 298,382

Others 59,304 (31,128)

1,102,897 937,415





11. TANGIBLE FIXED ASSETS

Buildings &

structures

VND Million

Machinery &

Equipment

VND Million

Vehicles &

ships

VND Million

Management

& equipment

VND Million

Others

VND Million

Total

VND Million

COST

As at 01 January 2011 19,286,032 72,437,442 12,092,220 1,153,406 24,125,627 129,094,727

New purchases, transfer from CIP

5,148,116 16,040,251 717,065 516,791 143,658 22,565,882

Disposals (167,878) (67,028) (94,303) (13,070) (213) (342,492)

Eff ect of foreign exchange diff erences 21,795 982,400 4,177 3,264 27 1,011,663

Reclassifi cation 30,121 (174,284) (9,361) 62,757 90,766 -

Revaluation 12,509 31 21,700 (124) - 34,117

Increases from business consolidation 185,044 218,857 28,082 16,077 7,117 455,177

As adjusted as per fi nal accounts (824,697) 930,389 120,654 33,201 293,174 552,721

Other movements (338,958) 110,957 120,779 (122,013) 26,100 (203,135)

As at 31 December 2011 23,352,083 90,479,017 13,001,013 1,650,290 24,686,257 153,168,660

ACCUMULATED DEPRECIATION

As at 01 January 2011 2,565,218 11,780,722 3,844,210 564,603 7,414,951 26,169,704

Charge for the year 1,164,625 5,270,889 1,198,817 230,180 2,602,937 10,467,449

Eliminated on disposals (37,377) (31,078) (49,961) (12,447) (189) (131,052)

Eff ect of foreign exchange diff erences 2,079 114,169 2,022 1,186 2 119,458

Reclassifi cation 33,725 25,141 3,282 (3,049) (59,099) -

Revaluation (5,648) (13,629) 10,116 (678) - (9,839)

Increases from business consolidation 45,375 97,584 17,100 9,197 102 169,358

Other movements 36,104 18,141 (52,774) (69,375) (8,862) (76,766)

As at 31 December 2011 3,804,102 17,261,939 4,972,812 719,617 9,949,842 36,708,312

NET BOOK VALUE

As at 31 December 2011 19,547,982 73,217,077 8,028,201 930,673 14,736,414 116,460,348

As at 31 December 2010 16,720,814 60,656,720 8,248,010 588,803 16,710,676 102,925,023

As at 31 December 2011, the cost of tangible fi xed assets of VND 23,530,325 million (31 December 2010: VND 20,243,360 million) was used to secure long-term loans which are presented in Notes 20 and 24. As at 31 December 2011, the cost of the Group’s tangible fi xed assets which were fully depreciated but are still in use was VND 7,379,408 million (31 December 2010: VND 6,858,062 million).





12. INTANGIBLE FIXED ASSETS

Land use

rights

VND Million

Patent rights

VND Million

Computer

software

VND Million

Others

VND Million

Total

VND Million

COST

As at 01 January 2011 1,162,202 465,934 224,294 51,841 1,904,271

Additions 1,057,067 12,356 137,492 10,045 1,216,960

Disposals (5,406) - (1,746) (74) (7,226)

Reclassifi cation - (15) 1,744 (1,730) (1)

Increasesfrombusiness consolidation

155,001 2,662 7,155 9,113 173,931

Other movements (72,078) 133,294 12,269 18,714 92,199

As at 31 December 2011 2,296,786 614,231 381,208 87,909 3,380,134

ACCUMULATED AMORTISATION

As at 01 January 2011 34,550 168,190 91,529 20,353 314,622

Charge for the year 14,458 35,963 64,837 8,616 123,874

Eliminated on disposals - - (816) - (816)

Increasesfrombusiness consolidation

1,282 1,731 2,337 1,602 6,952

Other movements (18,801) (2) 3,402 (716) (16,117)

As at 31 December 2011 31,489 205,882 161,289 29,855 428,515

NET BOOK VALUE

As at 31 December 2011 2,265,297 408,349 219,919 58,054 2,951,619

As at 31 December 2010 1,127,652 297,744 132,765 31,488 1,589,649

13. CONSTRUCTION IN PROGRESS

2011

VND Million

2010

VND Million

Opening balance 37,714,063 56,932,421

Additions 35,965,629 30,586,117

Transfer to tangible fi xed assets (20,508,828) (49,804,475)

Closing balance 53,170,864 37,714,063





13. CONSTRUCTION IN PROGRESS (cont.)

Details of constructions in progress as at 31 December 2011 were as follows:

Name of construction works31/12/2011

VND Million

31/12/2010

VND Million

Vung Ang Thermal Power Plant 1 13,681,092 2,907,801

Ca Mau Complex of Gas, Power and Fertilizer 10,639,133 3,475,333

Dinh Vu Polyester Textile Fiber Manufacturing Mill 5,404,407 4,196,394

Oil Tankers Building Project 2,599,139 284,985

Hua Na Hydroelectric Project 2,427,049 769,638

Petrovietnam Steel Pipe Plant Project 2,055,060 -

Long Phu Hau River Electricity Center 1,354,242 798,586

Nghi Son Oil Refi nery-Petrochemical Complex 1,688,947 1,449,165

Bio-ethanol Production Plant 1,528,040 776,388

Dakrinh Hydroelectric Project 1,089,932 312,702

Thai Binh Thermal Power Plant 857,403 335,255

Dung Quat LPG Cold Storehouse 790,395 2,584

Phu My Hung Finance Trade Centre Project 718,397 225,947

White Lion/White Rhino - White Tiger Gas Pipeline Project 695,280 206,984

Projects transferred from Vinashin (*) 667,522 667,522

Dzung Quat Shipbuilding Factory 533,090 396,556

CT 10-11 Van Phu Project 496,506 392,005

Ca Mau Offi ce and Residence Building 473,775 308,894

PVI Offi ce Tower Project at Yen Hoa, Cau Giay, Hanoi 445,754 214,892

Thai Binh Petroleum Hotel 329,546 41,867

Low pressure gas distribution systems 234,257 -

Construction works at Dzung Quat Oil Refi nery Plant 194,812 671,465

Golf court and Eco Villas Project in Cam Ranh 186,130 -

Block B - O Mon Gas Pipeline Project 178,395 74,780

Phuoc An Port 171,194 -

Xuan Phuong Project 170,551 -

Trade, Hotel, Offi ce Complex at Bac Lieu 167,274 -

Vung Tau Urban Area Projects 151,406 -

Nam Con Son 2 Pipeline 124,970 14,514

Vietnam Petroleum University Project 124,540 87,844

Cai Cui Port at Can Tho Ban Cuu Long 122,576 55,215

Apartment Project at Nam An Khanh, Hanoi 116,576 92,641





13. CONSTRUCTION IN PROGRESS (cont.)

Name of construction works2011

VND Million

2010

VND Million

Luang Prabang Hydroelectric Project 104,380 100,975

Petroleum service Industrial park Project in Soai Rap, Tien Giang 97,209 151,105

Nha Be Petroleum Storehouse Expansion Project 95,961 128,869

Liquefi ed natural gas import warehouse Port 95,033 -

Specifi c chemical warehouse in Cai Mep 93,207 -

Capacity enhancing Project - PV Gas Vung Tau Sea Port 91,480 -

My Khe Tourism Construction 86,669 56,900

PV Oil ‘s fi lling stations 89,640 -

Da Nang Central Mart 81,542 10,003

Nam Cat Hydro Power Plant 73,890 33,419

Cai Mep Oil & Gas Storehouse Port 51,298 -

Vung Tau Low Section Base Enlargement Project 30,011 208,726

Nhon Trach 2 Power Plant - 8,698,857

FSO5 Floating Oil Storage - 2,604,316

90 meter water jack-up rig - 2,082,354

TAD New Drilling Project - 1,813,305

Offi ce building at No. 43, Mac Dinh Chi, Ho Chi Minh City 5,733 442,195

Two crude oil tankers - 357,112

Dragon Tower Offi ce Building 478 285,102

PV Oil ‘s Central Petroleum Warehouse in Vung Ang - 193,694

Fertilizer Warehouse Project in Cai Rang, Can Tho - 122,446

Modular hydraulic jack-up drilling platform (working off shore) - 85,212

Lam Kinh Hotel Project, Thanh Hoa - 82,674

Other constructions 1,756,943 1,496,842

53,170,864 37,714,063

(*) As per the Prime Minister’s Decision No. 926/QD-TTg dated 18 June 2010 concerning restructuring Vietnam Shipbuilding Industry Group (Vinashin) and Offi cial Letter No.319/BTC-TCDN dated 30 August 2010 concerning guidance on fi nancial resolution over transfer and handover of entities and projects under the management of Vinashin, the Group was temporarily recording construction in progress handed over from Vinashin and payable to Vinashin with the same amount of VND 667,522 million. At the date of these fi nancial statements, there have been no offi cial written documents issued by relevant authorities concerning the value of construction in progress handed over from Vinashin.

As at 31 December 2011, the cost of construction in progress of VND 19,246,670 million (31 December 2010: VND 4,980,363 million) was used to secure long-term loans which are presented in Notes 20 and 24.





14. INVESTMENTS IN SUBSIDIARIES

Details of the Group’s subsidiaries as at 31 December 2011 were as follows:

Name of Subsidiaries Place of

incorporation

& operation

Proportion

of ownership

interest

Proportion of

voting power

held

Principal activity

PetroVietnam Oil Corporation Vietnam 100.00% 100.00% Oil processing and trading

PetroVietnam Power Corporation Vietnam 100.00% 100.00% Power production and trading

PetroVietnam Exploration Production Corporation Ltd.

Vietnam 100.00% 100.00% Exploration, production

Binh Son Refi nery and Petrochemical Co., Ltd.

Vietnam 100.00% 100.00% Oil refi nery, petrochemical

Dung Quat Shipbuilding Industry One Member Company Limited (*)

Vietnam 100.00% 100.00% Shipbuilding

Petrovietnam Ca Mau Fertilizer Company Limited

Vietnam 100.00% 100.00% Fertilizer and Chemicals

Petrovietnam Gas Joint Stock Corporation Vietnam 96.72% 96.72% Gas processing and distribution

Petec Trading and Investmenet Corporation Vietnam 95.08% 95.16% Trading, investment

Petrovietnam Finance Joint Stock Corporation

Vietnam 78.00% 78.00% Financial service

PetroVietnam Hospital JSC Vietnam 68.29% 100.00% Health care service

PetroVietnam Petrochemical and Textile Fiber JSC

Vietnam 72.70% 81.00% Petrochemical and textile fi ber

Ha Giang Petroleum Tourism and Trading JSC

Vietnam 67.08% 68.34% Trading

PetroVietnam Transportation Joint Stock Corporation

Vietnam 64.48% 66.18% Transportation

PetroVietnam Fertilizer and Chemicals Corporation - Joint Stock Company

Vietnam 61.37% 61.37% Fertilizer and chemicals

PVI Holdings Vietnam 44.38% 61.17% Insurance service

PetroVietnam Technical Services Corporation

Vietnam 56.56% 62.65% Services and construction

PV Security JSC Vietnam 54.50% 51.00% Security service

PV Drilling and Well Services Joint Stock Company

Vietnam 53.57% 54.47% Drilling and well services

PetroVietnam Energy Technology Corporation - Joint Stock Company

Vietnam 46.17% 51.00% Inspection, projects management

PetroVietnam Sapa Tourist JSC Vietnam 44.17% 74.74% Tourism services

PetroVietnam Construction Joint Stock Corporation (**)

Vietnam 41.21% 41.21% Construction

Drilling Mud Joint Stock Company (**) Vietnam 38.31% 41.42% Drilling mud





14. INVESTMENTS IN SUBSIDIARIESN (cont.)


incorporation

& operation

Proportion

of ownership

interest

Proportion of

voting power

held

Principal activity

PetroVietnam General Service Joint Stock Corporation

Vietnam 38.62% 50.99% Trading and services

Duyen Hai Petrovietnam Investment and Construciton JSC

Vietnam 31.34% 61.00% Construction

Petrovietnam Investment Consultancy and Engineering JSC (**)

Vietnam 29.00% 29.00% Ship and port services

Nhon Trach Specialized Shipbuilding One Member Company Limited (***)

Vietnam Shipbuilding

Lai Vu Shipbuiliding Industry Company Limited (***) Vietnam Shipbuilding

(*) Pursuant to the Prime Minister’s Decision No. 926/QD-TTg dated 18 June 2010 concerning restructuring Vietnam Shipbuilding Industry Group (Vinashin), the fi nancial statements of Dung Quat Shipbuilding Industry Company Limited, a company handed over from Vinashin, were included in the Group’s consolidated fi nancial statements. As at 31 December 2011, total assets and net assets of Dung Quat Shipbuilding Industry Company Limited were VND 6,725,131 million and (VND 230,856 million), respectively (on the transfer date, i.e, 01 July 2010 were VND 6,465,133 million and (VND 974,885 million), respectively).

At the date of this report, there have been no offi cial documents issued by relevant authorities concerning the values of assets and liabilities of Dung Quat Shipbuilding Industry Company Limited and amount that the Group should pay to Vinashin. These values are subject to change, depending on the offi cial approval thereon from relevant authorities.

(**) Although the Group holds less than 50% of the voting power of PetroVietnam Construction Joint Stock Corporation (PVC), Drilling Mud Joint Stock Company (DMC), Petrovietnam Investment Consultancy and Engineering JSC (PVE) the Group has the majority voting right at Board of Management’s meetings of theses companies; hence, the Group has the right to govern fi nancial and operating policies over these companies for a long time. Therefore, these companies’ fi nancial statements are included in the Group’s consolidated fi nancial statements.

(***) At the date of this report, Vietnam Oil and Gas Group - Holding Company was in progress of transferring Nhon Trach Shipyard Company Limited to PetroVietnam Technical Service Corporation (PTSC) and transferring Lai Vu Shipbuiliding Industry Company Limited to Ocean Commercial Joint Stock Bank (Ocean Bank).

15. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

Detail of the Group’s share of net assets of associates and joint ventures as at 31 December 2011 was as follows:

31/12/2011

VND Million

31/12/2010

VND Million

Cost of investments 17,137,258 16,014,258

Goodwill 147,802 176,374

Share of net profi ts of joint-ventures, associates 2,224,117 285,177

19,509,177 16,475,809





15. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (cont.)

Details of the Group’s associates as at 31 December 2011 were as follows:


incorporation

& operation

Proportion

of

ownership

interest

Proportion

of voting

power

held

Principal activity

PetroVietnam Trade Union Finance Investment Corporation Vietnam 35.00% 35.00% Financial investment

Green Indochina Development JSC Vietnam 34.00% 34.00% Mining services

Nghi Son Refi nery and Petrochemical Co., Ltd. Vietnam 25.10% 25.10% Oil refi nery, petrochemical

Ocean Commercial Joint Stock Bank Vietnam 20.00% 20.00% Banking

Fair Field Vietnam Company Limited Vietnam 25.00% 25.00% Seismic processing

Vinabenny JSC Vietnam 8.13% 23.84% Construction

Mekong Transportation JSC Vietnam 28.34% 43.30% Transportation

PetroViet Nam Biofuels Joint Stock Company Vietnam 40.06% 39.00% Produce and distribute biofuels

Petroleum Trading JSC Vietnam 29.00% 29.00% Trading

Materials-Petroleum Joint Stock Company Vietnam 33.53% 27.85% Petroleum trading

Thu Duc Trading and Import Export JSC Vietnam 44.09% 44.84% Trading

Ca Mau Trading Joint Stock Company Vietnam 22.51% 25.99% Trading

Thuan An General Trading JSC Vietnam 22.21% 22.21% Trading

Binh Thuan Trading JSC Vietnam 35.39% 35.39% Trading

Quang Tri Trading and Service JSC Vietnam 42.13% 45.00% Trading

Sai Gon Phu Yen Petroleum JSC Vietnam 26.18% 39.00% Petroleum trading

Phu Dat Investment & Construction Joint Stock Company Vietnam 20.26% 52.51% Construction

PetroTower Company Limited Vietnam 9.27% 24.00% Offi ce rental services

Vang River Hydroelectric JSC Vietnam 38.55% 31.90% Hydroelectric

Sao Mai Ben Dinh Petro Investment JSC Vietnam 23.75% 20.50% Investment Services

Song Hong Energy JSC Vietnam 44.07% 44.00% Hydroelectric projects

Lam Kinh Petroleum Hotel JSC Vietnam 1.79% 23.00% Lam Kinh Hotel operation

Nam Chien Hydroelectric JSC Vietnam 40.81% 40.00% Hydroelectric

Viet Laos Hydroelectric JSC Vietnam 22.35% 22.00% Hydroelectric

Song Tranh Hydroelectric JSC No.3 Vietnam 20.00% 20.00% Hydroelectric

Petrovietnam Power Project Consultant JSC Vietnam 76.56% 49.00% Project consultancy

Asia Pacifi c Energy JSC Vietnam 35.00% 35.00% Energy

Petrovietnam Nghe An Construction JSC Vietnam 9.43% 22.89% Construction

Sai Gon Petroleum Construction and Investment JSC Vietnam 11.37% 26.19% Construction

Heerim-PVC International Design JSC Vietnam 18.13% 44.00% Design







incorporation

& operation

Proportion

of

ownership

interest

Proportion

of voting

power held

Principal activity

PetroVietnam Mechanical and Electrical Joint Stock Company

Vietnam 20.71% 36.00% Mechatronic

PetroVietnam SSG Real Estate JSC Vietnam 22.70% 42.95% Housing Services

High Tech Concrete Investment JSC Vietnam 21.16% 36.67% Trading on high tech concrete

Hoa Cam Industrial Zone Investment JSC Vietnam 9.56% 45.50% ndustrial zone

PVC-FECON Pretension Concrete JSC Vietnam 11.50% 35.00% Concrete supply

Petroleum Internal and External Equipment JSC Vietnam 8.59% 20.86% Equipment supply

Hoa Binh Petro Construction Investment JSC Vietnam 14.99% 36.36% Construction

Truong Son Petroleum Construction JSC Vietnam 4.05% 25.14% Construction

Kinh Bac Petroleum Construction and Investment JSC Vietnam 7.39% 23.44% Construction

Petroleum Interior Decoration JSC Vietnam 20.60% 50.00% Design services

Petroleum Song Hong building material and construction installation JSC

Vietnam 8.17% 38.89% Building materials supplying

PetroVietnam Electricity Construction JSC Vietnam 3.28% 22.00% Construction & Electricity

Song Da Trading and Transport JSC Vietnam 11.12% 26.99% Construction

PV2 Investment JSC Vietnam 26.62% 52.57% Financial investment

PetroVietnam Insurance Service JSC Vietnam 8.88% 30.86% Insurance services

Lao Cai International Hotel JVC Vietnam 11.04% 25.00% Hospitality

Ham Rong Rubber Tourism JSC Vietnam 15.46% 35.00% Tourism

Viet Housing International Development and Investment JSC

Vietnam 15.09% 34.00% Real estates

Petrovietnam Marine Shipyard Joint Stock Company Vietnam 25.48% 26.33% Construction & repair mobile off shore d

FGAS JSC Vietnam 7.84% 25.00% LPG distribution

DREAM HOUSE Education Services Ltd. Vietnam 13.40% 49.00% Educational services

Loc Viet Joint Stock Company Commercial Services Vietnam 6.22% 20.00% Spa, Fitness & Bar

DMC Mineral Industry JSC Vietnam 23.40% 30.00% Mineral exploration & processing

PetroVietnam Gas City Invesment and Development JSC Vietnam 34.34% 35.51% LPG distribution

Vietnam Investment and Asset Trading JSC Vietnam 35.98% 48.22% Financial investment

Nangluongmoi Trading and Communication JSC Vietnam 33.02% 74.39% Media

PETEC Binh Dinh Joint Stock Company Vietnam 29.99% 31.54% Trading

PETEC Logistics Joint Stock Company Vietnam 27.99% 28.20% Transportation & Storage







incorporation

& operation

Proportion

of

ownership

interest

Proportion

of voting

power held

Principal activity

Petrovietnam Nondestructive Inspection Technology Solution Corporation

Vietnam 13.39% 29.00% Technological solution

Petrovietnam Control & Instrumentation JSC Vietnam 13.39% 29.00% Control & Instrumentation

EIC Marine Energy Technology Invesment & Development Corpoartion

Vietnam 27.61% 29.00% Trading

Petrovietnam Technology Development Investment Material Corporation

Vietnam 13.10% 29.00% Construction materials

Details of the Group’s joint ventures as at 31 December 2011 were as follows:


incorporation

& operation

Proportion

of

ownership

interest

Principal activity

Vietnam-Russia Vietsovpetro Joint Venture (*) Vietnam 51.00% Crude oil production

Rusvietpetro Joint Venture Company (**) Russia 49.00% Crude oil production

Gazpromviet LLC Russia 49.00% Crude oil production

Petromacareo Joint Venture Company (***) Venezuela 40.00% Crude oil production

Petrovietnam Oil Stockpile Co., Ltd Vietnam 30.60% Storage construction investment

Orient Petrochemical and Bio-fuels Joint Stock Company Vietnam 28.89% Fuels

LG-VINA Chemical Joint Venture Company Vietnam 15.00% Petroleum production and selling

Off shore Floating Terminal (Ruby) Vietnam Co., Ltd. Malaysia 33.93% Ship services

Malaysia Vietnam Off shore Terminal Limited Malaysia 27.71% Ship services

Rong Doi MV12 Pte. Ltd. Singapore 18.66% Petroleum services

PTSC South East Asia Pte. Ltd. Singapore 28.84% FSO rental services

PV Drilling Production Testers International - PTI Vietnam 27.32% Services

Petrovietnam Drilling Tubular Management Co., Ltd Vietnam 27.32% Tubular services

BJ Services - PV Drilling Joint Venture Company Limited Vietnam 26.25% Services

PV Drilling - Baker Hughes Well Technical Services Joint Venture Company Limited

Vietnam 27.32% Technical drilling services

PVTrans Emas Company Limited Vietnam 32.24% Repair and mainternance marine ships

DMC-VTS Joint Venture Company Limited Laos 11.49% Barite exploration & mining

No. 27 Thai Thinh project - No. 52 Hanoi Housing Investment & Development JSC

Vietnam 9.46% Real estate

Thanh Cong B project - No. 52 Hanoi Housing Investment & Development JSC Vietnam 18.54% Real estate






(*) On 5 September 2007, the Government issued Decree No. 142/2007/ND-CP concerning the promulgation of Financial Management Regulations applicable to Vietnam Oil and Gas Group - Holding Company. Accordingly, 50% of profi t distributed from Vietnam-Russia Vietsovpetro Joint Venture (VSP) is recorded as an amount payable to the State Budget and the remaining 50% were credited to Owner’s equity as additional capital injection from State Budget. Therefore, the investment in this jointly controlled entity is always stated at cost and share of net profi t (loss) is not recorded in the Group’s consolidated income statement.

In 2010, the Vietnamese Government and the Government of Russian Federation signed an agreement on further cooperation in geological exploration and petroleum production on Vietnam’s continental shelf within Vietnam-Russia Vietsovpetro joint venture framework. This agreement takes effect from 01 January 2011 and becomes valid through 31 December 2030. Ownership interest proportion of Vietnam Oil and Gas Group in the joint venture (Vietsovpetro) is 51%. The reflection of this interest in joint venture for the following years is subject to change from time to time, depending on the Charter and financial management regulations of Vietnam Oil and Gas Group - Holding Company.

(**) Rusvietpetro Joint Venture Company registered and established in July 2008 in Russia between Vietnam Oil and Gas Group and Zarubezhneft Group with an aim to petroleum investment and production in Autonomous Zone Nhenhetxki in the Russian Federation.

(***) Petromacareo Joint Venture Company established in Venezuela between PetroVietnam Exploration Production Corporation Ltd. and Corporación Venezolana del Petróleo S.A. Company (CVP) aimed to produce and upgrade oil block Junin 2, the Orinoco Oil Belt, Republic of Boliva Venezuela under an agreement signed on 01 July 2010. The operation duration of the joint venture is 25 years and may extend up to another 15 years.

16. OTHER LONG-TERM INVESTMENTS

31/12/2011

VND Million

31/12/2010

VND Million

Long-term loans (*) 23,290,325 23,009,314

Investments in other entities 1,392,683 1,759,520

Investment in shares 848,802 807,872

Bonds 458,000 408,000

Long-term deposits 123,067 245,067

Investments in other funds and projects 573,597 146,215

Long-term trust investments 746,547 72,685

Others 3,200 50,806

27,436,221 26,499,479

(*) Long-term loans represent the Group’s unsecured loan to Rusvietpetro (incorporated in the Russian Federation) and other entities outside the Group. The loan provided to Rusvietpetro has a term of 5 years, of which 1.5 year is grace period and with interest equaling annual SIBOR and principal of USD 411 million as at 31 December 2011 (31 December 2010: USD 339 million). Other long-term loans mainly represent loans provide to local economic entities with a term of over 01 year that PetroVietnam Finace Joint Stock Corporation.





17. LONG-TERM PREPAYMENTS

31/12/2011

VND Million

31/12/2010

VND Million

Exploration & development expenses of oil, gas fi elds under production 46,807,710 32,348,216

Foreign exchange losses in the construction stage 3,219,546 2,822,896

Goodwill incurred in revaluation for initial public off ering 3,555,115 3,496,998

Land, ground and offi ce renting expenses 867,955 540,863

Fees for the credit facilities 644,585 689,025

Deferred gas cylinders 661,206 384,906

Maintenance and repair expenses 528,953 420,625

Deferred tool and supplies 394,235 281,215

Others 583,735 575,324

57,263,040 41,560,068

18. EXPLORATION EXPENSE

31/12/2011

VND Million

31/12/2010

VND Million

Local exploration expenses 13,069,577 10,246,211

Overseas exploration expenses 4,828,376 6,930,289

Project expenses (*) 61,946 619,458

17,959,899 17,795,958

(*) Project expenses which represent general and administration expenses and expenses relating to the tasks of petroleum searching and prospect evaluation incurred by PetroVietnam Exploration and Production Corporation Limited have not yet been approved by competent authority for write-off .

19. DEVELOPMENT EXPENSE

31/12/2011

VND Million

31/12/2010

VND Million

Local development expenses 15,758,525 6,257,234

Overseas development expenses 7,278,996 1,429,087

23,037,521 7,686,321

20. SHORT-TERM LOANS AND LIABILITIES

31/12/2011

VND Million

31/12/2010

VND Million

Short-term loans 59,048,007 41,678,975

Current portion of long-term loans (See Note 24) 20,462,273 8,828,552

79,510,280 50,507,527

Short-term loans represent loans denominated in EUR, USD and VND, which were obtained from commercial banks and other credit institutions..





21. TAXES AND AMOUNTS PAYABLE TO THE STATE BUDGET

31/12/2011

VND Million

31/12/2010

VND Million

Profi t payable to the State Budget (*) 20,632,814 11,946,895

Corporate income tax 6,787,970 5,476,696

Additional tax charge (**) - 1,085,430

Natural resource tax 1,247,490 911,422

Other taxes 2,977,149 2,399,240

31,645,423 21,819,683

(*) The profi t payable to the State Budget represents share of profi t oil distributed from Vietsovpetro and profi t oil earned under Production Sharing Contracts and Joint Operating Companies (PSCs, JOCs).

(**) Additional tax charge will be determined in accordance with Decision No. 1942/QD-TTg dated 25 November 2009 issued by the Prime Minister on the collection for regulatory purpose in respect of refi ned petroleum and petrochemical products locally consumed. In 2011, import duty rate applied on refi ned petroleum and petrochemical products was lower than the regulated minimum tax rate, accordingly, the Group has not incurred additional tax charge payable to the State Budget.

22. ACCRUED EXPENSES

31/12/2011

VND Million

31/12/2010

VND Million

Accrued expenses of petroleum contracts (*) 9,311,301 4,691,085

Major maintenance, construction and installation costs 2,581,088 3,292,994

Borrowing costs 1,085,349 1,349,802

Accrued expenses relating to drilling activities 185,375 82,446

Accrued foreign petroleum income tax and foreign contractor withholding tax 383,346 72,857

Other accruals 979,908 1,750,469

14,526,367 11,239,653

(*) Accrued expenses of petroleum contracts represent the costs payable related to exploration, development and production activities by operators of petroleum blocks in which the Group has an interest.

23. OTHER CURRENT PAYABLES

31/12/2011

VND Million

31/12/2010

VND Million

Payable to trust investor 3,110,153 3,454,659

Fund for decommissioning cost 2,858,527 2,195,914

Construction and consulting cost of Vung Ang Thermal Power Plant 1,407,221 -

Tax payable for petroleum contractors 890,609 770,493

Transferred from Vinashin (See Note 13) 667,522 667,522

Cash advance for petroleum contracts 421,009 209,538

Payable relating to change in selling prices of gas 410,678 -

Settlements of securities transaction by the investors 216,822 788,368





23. OTHER CURRENT PAYABLES (cont.)

31/12/2011

VND Million

31/12/2010

VND Million

Payables relating to dividends, joint venture interest 201,597 316,229

Payable relating to building of new FSO5 192,784 -

Payables relating to salary and bonus 164,713 97,046

Payable to Mercuria Energy Trading SA 161,570 -

Payables to the State Bank of Vietnam relating to interest support program 144,303 92,697

Payable relating to guarantees 142,152 138,868

Payables relating to land use right, assets tranfer 136,447 296,955

Payable relating to petroleum activities 103,111 12,058

Payables relating to shares purchase 102,197 62,236

Payables to Dragon Tower project management board 78,980 129,005

Payables to banks for loan interest 66,307 61,565

Payables relating to compensation 63,230 328,756

Payables relating to completed contructions 35,397 488,277

Goods borrowed payable 20,159 74,402

Payables relating to investment cooperation contract - 840,000

Others 1,595,286 1,537,806

13,190,774 12,562,394

24. LONG-TERM LOANS AND LIABILITIES

31/12/2011

VND Million

31/12/2010

VND Million

US Dollar 78,200,899 65,473,746

Vietnam Dong 7,665,741 6,356,524

Euro 4,861,226 4,101,603

90,727,866 75,931,873

Long-term loans represent the loans in USD, VND and EUR from banks and other credit institutions. These loans are either unsecured or guaranteed by the Ministry of Finance of S.R. Vietnam or secured by fi xed assets of the Group.

Interest rates per annum are as follows:

2011 2010

US Dollar 1.65% - 9.5% 1.85% -7.7%

Vietnam Dong 4.9% - 24% 6.9% - 18.6%

Euro 4.15% - 5.5% 5.33% -5.5%





24. LONG-TERM LOANS AND LIABILITIES (cont.)Long-term loans are repayable as follows:

31/12/2011

VND Million

31/12/2010

VND Million

On demand or within one year 20,462,274 8,828,552

In the second year 17,657,376 10,483,707

From the third to fi fth year inclusive 41,235,866 29,646,337

After fi ve years 31,832,282 29,598,637

111,187,798 78,557,233Less: Amount due for settlement within one years (shown under short-term loans and liabilties) (20,462,274) (8,828,552)

Amount due for settlement after 12 months 90,725,524 69,728,681

Bond issuance 2,342 6,203,192

90,727,866 75,931,873

As at 31 December 2011, the Group had signed some loan agreements but had not withdrawn the principal with the

following details:

- On 22 April 2011, the Group signed the export credit loan contracts to fi nance the bidding packages of Vung Ang Thermal Power Plant 1 Project with a combination of four international banks in which HSBC Bank acted as lead arranger, including China Development Bank Corporation (CDB), the Hongkong and Shanghai Banking Corporation Limited (HSBC), the Bank of Tokyo-Mitsubishi UFJ Limited (BTMU), and Credit Suisse AG (Credit Swiss). Total loans amount to USD 146,278,582, the loan terms are from 13 to 15 years, including grace period of 3 years. The loan is guaranteed by the Ministry of Finance. The export credit loans are insured by two export credit agencies named Euler Hermes Kreditversicherungs AG (Hermes) of Germany and China Export and Credit Insurance Corporation (Sinosure) of China.

- On 12 August 2011, the Group signed the export credit loan contracts to fi nance Vung Ang Thermal Power Plant 1 Project with two banks, including Japan Bank for International Cooperation (JBIC) and Sumitomo Mitsui Banking Corporation (SMBC). Total loans amount to USD 95,837,500, loan term is 13 years including a grace period of 3 years, and are guaranteed by the Ministry of Finance.

- On 15 September 2011, the Group signed export credit loan contracts with a combination of three international banks in which BNP Paribas Bank acted as lead arranger including Banque Nationale de Paris (BNP), China Eximbank and Credit Agricole Corporate and investment Bank (CIB) to fi nance investment in Ca Mau Fertilizer Plant Project. Total loans amount to USD 220 million, the loan term is 13 years including a grace period of 3 years, and are guaranteed by the Ministry of Finance.

25. EQUITY

Owner’s contributed

capital

VND Million

Other capital and

funds

VND Million

Retained earnings

VND Million

Total

VND Million

As at 01 January 2011 177,628,384 51,597,690 3,139,768 232,365,842

Capital from the State Budget - 3,500,000 - 3,500,000

Profi t after tax - - 30,458,429 30,458,429

Funds allocation - 11,601,150 (11,601,150) -

Bonus and welfare funds - - (774,057) (774,057)

Foreign exchange diff erence - (2,111,021) - (2,111,021)

Others - 344,214 (76,272) 267,942

As at 31 December 2011 177,628,384 64,932,033 21,146,718 263,707,135





26

. B

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27. FINANCIAL INCOME

31/12/2011

VND Million

31/12/2010

VND Million

Bank and loan interest income 8,137,331 6,032,175

Foreign exchange gains 4,475,439 4,209,923

Dividends and profi t received 2,087,709 1,939,586

Others 813,287 1,147,828

15,513,766 13,329,512

28. FINANCIAL EXPENSES

31/12/2011

VND Million

31/12/2010

VND Million

Foreign exchange losses 7,904,463 5,214,077

Interest expense 4,512,936 2,495,240

Loss from securities trading 484,998 408,178

Provision for diminution in value of investments 448,575 268,206

Others 481,377 263,833

13,832,349 8,649,534

29. PROFIT FROM OTHER ACTIVITIES

31/12/2011

VND Million

31/12/2010

VND Million

Compensation received 882,183 258,265

Proceeds from disposals of assets, materials and goods 743,834 160,764

Revaluation of assets 208,479 137,145

Proceeds from selling Certifi ed Emission Reduction - 245,843

Others (152,661) 225,009

1,681,835 1,027,026

30. CURRENT CORPORATE INCOME TAX EXPENSE

31/12/2011

VND Million

31/12/2010

VND Million

Corporate income tax on exploration and production 13,891,686 10,496,469

Corporate income tax on other activities 4,881,356 4,231,469

18,773,042 14,727,938

Corporate income tax related to cruel oil and gas production under production sharing contracts was determined in accordance with contracts’ terms and conditions and using tax rates fi xed for each oil block as regulated by the Ministry of Finance.





31. DEFERRED CORPORATE INCOME TAX EXPENSE

Deferred tax liabilities:

Exploration and production

VND Million

Other activities

VND Million

Total

VND Million

As at 01 January 2010 5,249,802 96,981 5,346,783

Charge for the year 347,261 92,970 440,231

As at 01 January 2011 5,597,063 189,951 5,787,014

Charge for the year 323,766 364,827 688,593

As at 31 December 2011 5,920,829 554,778 6,475,607

Deferred tax assets:

Other activities

VND Million

Total

VND Million

As at 01 January 2010 74,003 74,003

Charge for the year 241,199 241,199

As adjusted as per equitization fi nalization (57,188) (57,188)

Others (1,048) (1,048)

As at 01 January 2011 256,966 256,966

Charge for the year 11,506 11,506

Others 49,860 49,860

As at 31 December 2011 318,332 318,332

Total deferred tax expenses were charged to the consolidated income statement of the year as follows:

31/12/2011

VND Million

31/12/2010

VND Million

Deferred tax assets (11,506) (241,199)

Deferred tax liablities 688,593 440,231

677,087 199,032





32. COMMITMENTS

Operating lease commitments

At the balance sheet date, the Group had outstanding commitments under non-cancelable operating leases, which fall due as follows:

31/12/2011

VND Million

31/12/2010

VND Million

Within one year 1,941,699 1,983,941

From the second to fi fth year inclusive 3,551,116 3,775,511

After fi ve years 583,892 776,481

6,076,707 6,535,933

Purchasing commitments

The Group commits that it will purchase gas from gas owners of blocks 06.1, 11.2, PM3 CAA and 46 Cai Nuoc for a term of approximately 20 years with a minimum annual gas quantity of 6.922 billion cubic meters (as defi ned in the Gas Sale and Purchase Agreement (“GSPA”)).

Selling commitments

The Group commits to sell a minimum annual natural gas quantity of 1.85 billion cubic meters of Nam Con Son gas to Vietnam Electricity Group valid until the end of stabilization period as defi ned in the Gas Sale Agreement (“GSA”).

The Group also commits to sell Nam Con Son gas to Phu My 3 BOT (PM3) and Mekong Energy Company (PM 2.2). These companies will undertake to consume an annual fi xed gas quantity of 1.7 billion cubic meters valid until 2023.

Capital commitments

The Group has commitments relating to investments in capital construction, machinery and equipment in 2012 amounting to VND 65,843 billion and USD 159 million.

The Group has capital contribution commitments relating to oil and gas exploration projects in Vietnam and foreign countries in 2012 with the total amount of VND 46,664 billion.

33. CONTINGENT LIABILITIES

According to the electricity sale contracts with Electricity Power Trading Company (“EPTC”), the Group estimated interest charge on deferred payment of electricity payables from EPTC to the Group in an amount of VND 1,717 billion. The Group was negotiating with related parties to solve this issue. At the date of these consolidated fi nancial statements, there was no fi nal offi cial decision; therefore, the Group did not record receivables and payables relating to such interest charge on deferred payment of electricity with EPTC.

As at 31 December 2011, the Group had outstanding contingent liabilities and other commitment obligations toward banks and other guaranteed parties, which arose during the normal course of business operation. It is anticipated that no material liabilities will arise. Vietnam Oil and Gas Group - Holding Company also provided certain long-term loan guarantees for its subsidiaries with the total outstanding principal of VND 10,392 billion as at 31 December 2011 (31 December 2010: VND 10,508 billion).





33. CONTINGENT LIABILITIES (cont.)

Under the Petroleum Law in Vietnam, oil and gas contractors have to remove the oil and gas production facilities and restore the original environment when fi nishing exploration activities. The annual restoration fund is required to be made starting from the year the fi eld has commercial petroleum production. The annual decommissioning cost is determined based on total amount to be provided, production volumes and proved reserves. The petroleum contractors have to ensure that the restoration fund is suffi cient to cover necessary decommissioning costs one year before a petroleum contract expires. As at 31 December 2011, provision for decommissioning costs for some petroleum fi elds has not yet been provided in accordance with Vietnam Petroleum Law. At the issue date of this report, decommisioning costs for certain aforesaid petroleum fi elds were not yet determined. The Board of Management has evaluated and believed that the unrecorded amount was not material to the consolidated fi nancial statements for the year ended 31 December 2011.

34. FINANCIAL INSTRUMENTS

Capital risk management

The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximising the return to the owner through the optimisation of the debt and equity balance.

The capital structure of the Group consists of net debt (borrowings disclosed in Notes 20 and 24, off set by cash and cash equivalents) and equity attributable to equity holders of the parent (comprising owner’s contributed capital, reserves and retained earnings).

Signifi cant accounting policies

Details of the signifi cant accounting policies and methods adopted (including the criteria for recognition, the bases of measurement, and the bases for recognition of income and expenses) for each class of fi nancial asset, fi nancial liability and equity instrument are disclosed in Note 4.

Categories of fi nancial instruments Carrying amounts

31/12/2011

VND Million

31/12/2010

VND Million

Financial assets

Cash and cash equivalents 96,013,979 94,547,936

Trade and other receivables 68,827,095 49,129,239

Short-term investments 36,933,211 28,184,543

Long-term investments 27,142,071 26,366,981

Other fi nancial assets 887,321 791,847

Total 229,803,677 199,020,546

Financial liabilities

Borrowings 170,117,962 126,397,838

Trade and other payables 50,710,033 41,878,915

Accruals 14,526,345 11,239,653

Other fi nancial liabilities 120,215 41,562

Total 235,474,555 179,557,968

The Group’s fi nancial liabilities exclude taxes and other amounts payable to the State Budget (Note 21).





34. FINANCIAL INSTRUMENTS (cont.)

The Group has not assessed fair value of its fi nancial assets and liabilities as at the consolidted balance sheet date since there are no comprehensive guidance under Circular 210 and other relevant prevailing regulations to determine fair value of these fi nancial assets and liabilities.

Financial risk management

The Group is exposed to risks related to normal business activities including upstream operations and others. The Group is operated under the regulations on the operation and financial management applicable to one member limited liability company owned by the State, the Group’s charter and financial regulations and other relevant financial regulations. These regulations form a ground for the establishment of risk management policies for the Group’s entire financial activities.

Financial risk includes market risk (foreign currency rate, interest rate risk and price risk), credit risk and liquidity risk.

Market risk

Foreign currency rate risk management

The Group undertakes certain transactions denominated in foreign currencies, including export of crude oil, purchase of goods and services for upstream operations, acquisition of overseas petroleum assets and construction of works for midstream and downstream operations, accordingly, the Group will be exposed to foreign currency fl uctuations.

The Group manages the balance of receipts and expenditures denominated in foreign currencies through negotiating economic contracts based on balancing foreign currency source payable to suppliers and trade receivables and through balancing loans in foreign currencies; therefore, the needs of foreign currency payments can be fulfi lled and foreign currency risks can be minimized. Moreover, the Group has stable foreign currency earnings from crude oil export. Such stable foreign currency earnings is suffi cient to cover liabilities, loans in foreign currencies as well as other foreign currency needs in the course of petroleum searching, exploration and production. The Group evaluates that it can control foreign currency risks to an acceptable level, ensuring no net currency imbalance.

Interest rate risk management

The Group has signifi cant interest rate risks arising from interest bearing loans which are arranged, term bank deposits and receivables and loans. The Group manages interest rate risks by closely monitoring relevant market movements to decide on the best interest rates to limit relevant risks to acceptable levels and maintaining an appropriate mix between fi xed and fl oating rate borrowings. Moreover, the Group has concluded and adopted interest rate swap contracts (ISDA).

Management of price risks of investments in equity instruments

The Group’s subsidiaries has certain investments in listed and unlisted companies and are exposed to risks of prices of these investments. Risks pertain to results and fi nancial position of the investees and market conditions. Investments are managed by selecting industries and investment limits. Moreover, provision for investment impairments are made when there is an impairments in the book value compared to the trading price of equity instruments.

For investments under plan for restructured invenstment portfolio for the period 2012-2015, the Group will plan capital withdrawal in line with market circumstances in each period and not lower than invested amounts and not aff ecting the Group’s main operating activities.






Market risk (cont.)

Commodity price risk management

The Group purchases raw materials, goods, machinery and equipment from local and foreign suppliers to serve petroleum searching, exploration, capital construction and trading activities. Therefore, the Group is likely to be exposure to the risks of changes in selling prices of raw materials and commodities.

The Group manages commodity price risks by diversifying suppliers and selecting the person who off ers the best prices using competitive shopping or bidding methods. Simultaneously, the Group prudently evaluates the potential effi ciency of projects before embarking on investments to ensure deliverables of projects to likely make up for investment costs and to be profi table later.

The Group is also subject to the State’s regulations on selling prices of such output products as gas, electricity, gasoline and oil and the Group manages price risks of those products as follows:

Gas: the Group purchases gas directly from block owners and sells under gas sale agreements to consumers for a fi xed period of time. For selling not under gas sale agreements, the Group signs contracts for shorter time and adjusts selling prices which are appropriate to purchase prices to ensure profi tability.

Electricity: the Group determines selling prices based on operation capacity and operating costs as agreed with EPTC to make sure of profi tability.

Petroleum and gasoline: the Group determines selling prices in accordance with Decree No.84/2009/ND-CP dated 15 October 2009 issued by the Government concerning trading of petroleum and gasoline. Accordingly, selling prices of petroleum and gasoline are subject to market movements with the governance of the Ministry of Industry and Trade and Ministry of Finance. The Group makes reserve for oil stabilization fund in accordance with prevailing relevant regulations to make up for losses incurred (if any) in case of the absence of approval on increase in selling prices by the Ministry of Industry and Trade and Ministry of Finance.

Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in fi nancial loss to the Company (bank deposits, receivables and investments). The Group has a credit policy in place and the exposure to credit risks in monitored on an ongoing basis.

At the balance sheet date, the Group had credit risks as follows:

Sales of electricity due from Vietnam Electricity were VND14,380 billion. Currently, the Group was working with Vietnam Electricity and the State’s competent authorities to collect this amount.

Credit facilities the Group had provided to Vietnam Shipbuilding Industry Group (Vinashin) with total amount of VND equivalents 1,067,927 million (of which VND1,067,927 million was overdue) and to some entities of Vietnam National Shipping Lines (Vinalines) with the total amount of VND equivalents 1,820,711 million (of which VND1,746,971 million was overdue). The Group assessed the situation carefully and believed that it would take eff ective measures to manage the credit quality and be able to collect principals and interest incurred in such credit facilities in the coming years.

For bank deposits, the Group deposits mainly at commercial banks or fi nancial institutions whose majority or all of ownership interest is held by the State and the Group evaluates credit risks at low level.

For receivables, the Group’s credit risk level primarily depends on the nature of each industry lines. The Group regularly monitors payment schedules and recoverability.






Credit risk (cont.)

For loans, the Group regularly monitors and controls credit growth and manage credit in line with the plan set in early 2011, i.e, increasing short-term credit, providing credit to a diversifi cation of industries with a focus on long-time customer groups, increasing loans with pledged assets and strictly resolving bad debts or debts with likely problems.

Liquidity risk management

The purpose of liquidity risk management is to ensure the availability of funds to meet present and future fi nancial obligations. Liquidity is also managed by ensuring that the excess of maturing liabilities over maturing assets in any period is kept to manageable levels relative to the amount of funds that the Group believes can generate within that period. The Group’s policy is to regularly monitor current and expected liquidity requirements to ensure that the Group maintains suffi cient reserves of cash, borrowings and adequate committed funding from its owners to meet its liquidity requirements in the short and longer term.

The table has been drawn up based on the undiscounted cash fl ows of fi nancial liabilities based on the earliest date on which the Group can be required to pay and is measured at carrying amounts.

31/12/2011 Less than 1 year

VND Million

Over 1 year

VND Million

Total

VND Million

Borrowings 79,486,309 90,631,653 170,117,962

Trade and other payables 49,802,172 907,861 50,710,033

Accruals 14,526,234 111 14,526,345

Other fi nancial liabilities 24,002 96,213 120,215

Total 143,838,717 91,635,838 235,474,555

31/12/2010 Less than 1 year

VND Million

Over 1 year

VND Million

Total

VND Million

Borrowings 50,499,714 75,898,124 126,397,838

Trade and other payables 40,781,988 1,096,927 41,878,915

Accruals 11,239,653 11,239,653

Other fi nancial liabilities 7,813 33,749 41,562

Total 102,529,168 77,028,800 179,557,968

The management assessed the liquidity risk concentration at low level. The management believes that the Company will be able to generate suffi cient funds to meet its fi nancial obligations as and when they fall due.

The following table details the Group’s expected maturity for its non-derivative fi nancial assets. The table has been drawn up based on the undiscounted contractual maturities of the fi nancial assets. The inclusion of information on non-derivative fi nancial assets is necessary in order to understand the Group’s liquidity risk management as the liquidity is managed on a net asset and liability basis.






Liquidity risk management (cont.)

31/12/2011

Less than 1 year

VND Million

Over 1 year

VND Million

Total

VND Million

Cash and cash equivalents 96,013,979 - 96,013,979

Trade and other receivables 68,807,969 19,126 68,827,095

Short-term investments 36,933,211 - 36,933,211

Long-term investments 93,600 27,048,471 27,142,071

Other fi nancial assets 645,939 241,382 887,321

Total 202,494,698 27,308,979 229,803,677

31/12/2010

Less than 1 year

VND Million

Over 1 year

VND Million

Total

VND Million

Cash and cash equivalents 94,547,936 - 94,547,936

Trade and other receivables 49,119,396 9,843 49,129,239

Short-term investments 28,184,543 - 28,184,543

Long-term investments 856,652 25,510,329 26,366,981

Other fi nancial assets 706,899 84,948 791,847

Total 173,415,426 25,605,120 199,020,546

35. RELATED PARTY TRANSACTIONS AND BALANCES

The following signifi cant transactions and balances with related parties who are also State-owned:

- Vietnam Shipbuilding Industry Group (Vinashin): the Group’s signifi cant transactions with Vinashin relating to the receipt of projects/subsidiaries and loans handed over from Vinashin are presented in Notes 6, 8, 13, 14 and 23.

- Vietnam National Shipping Lines (Vinalines): the Group’s signifi cant transactions with Vinalines relating to credit facilities provided to Vinalines are presented in Note 6.

- Vietnam Electricity (EVN): the Group’s signifi cant transactions with EVN relating to sales of electricity, gas and loans to EVN are detailed as below:

Sales of electricity made to EVN in 2011 were VND 18,447,251 million (2010: VND 14,775,118 million). Sales of electricity receivable due from EVN was VND 14,380,149 million as at 31 December 2011 (31 December 2010: VND 4,949,905 million).

Sales of gas made to EVN in 2011 were VND 11,505,948 million (2010: VND 11,674,132 million). Sales of gas receivable due from EVN was VND 1,729,716 million as at 31 December 2011 (31 December 2010: VND 1,821,704 million).

Loans receivables as at 31 December 2011 was VND 214,579 million.

- Vietnam National Petroleum Group (Petrolimex): the Group’s signifi cant transactions with Petrolimex relating to trading of petroleum and gasoline. Sales of petroleum and gasoline made to Petrolimex in 2011 was VND 34,758,361 million (2010: VND 5,727,200 million). Balance of receivables relating to petroleum and gasoline as at 31 December 2011 was VND 4,727,463 million (31 December 2010: VND 1,375,928 million).





Do Van Hau

President & CEO


Ninh Van Quynh


35. RELATED PARTY TRANSACTIONS AND BALANCES (cont.)The following signifi cant transactions and balances with related parties who are joint ventures/associates.

- Vietnam - Russia Vietsovpetro Joint Venture: the Group entered into the following signifi cant transactions with Vietsovpetro:

Purchase of crude oil to produce refi ned petroleum and petrochemical products in 2011 with an amount of VND 106,152,969 million (2010: VND 46,532,227 million).

Sales of 90 meter water jack-up rigs with an estimated selling price of USD 198 million and receipt of advance payment of VND 2,103,300 million from Vietsovpetro.

Vessels and barges repairi ng services in 2011 with an amount of VND 527,700 million. Besides, the Group’s subsidiaries supplied others services such as construction, repairing of drilling rigs

repairing, catering services, etc. to Vietsovpetro.

- Rusvietpetro: the Group had major transactions with Rusvietpetro relating to short-term loans and long-term loans as presented in Note 16. Loan interest receivable as at 31 December 2011 was VND 188,092 million (31 December 2010: VND 83,871 million).

- Oceanbank Commercial Joint Stock Company: the Group had major transactions with Oceanbank relating to current accounts, term deposits, trust fund and loans.

Total balances of current account, term deposits and trust fund of the Group at Oceanbank as at 31 December 2011 were VND 21,097,607 million (31 December 2010: VND 14,934,393 million).

Total balances of the Group’s loans due to Oceanbank as at 31 December 2011 was VND 4,745,467 million (31 December 2010: VND 4,848,829 million).

36. SUBSEQUENT EVENTS

On 30 March 2012, the Group signed credit contract with DBS Bank with an committed amount of USD 75,000,000 to cover the Group’s investment cost of Hoang Long (block 16.1). The maximum loan duration does not exceed 60 months from fi rst disbursement date.

0n 05 April 2012, the Company signed an agreement with Gazprom EP International B.V on sale of 49% benefi ts of petroleum exploration and production at blocks 05.2 and 05.3 on the continental shelf, S.R.Vietnam.

37. COMPARATIVE FIGURES

Certain reclassifi cations have been made to the prior year’s fi gures to enhance their compairability with the current year’s

presentation.

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