Japanese investor jumps into lucrative petrol retail market

The Japanese oil & gas group has recently announced that the first Idemitsu Q8 filling station opened in Hanoi. 

This is the first time a 100% foreign invested enterprise has joined the local petroleum retail market. Decree 83 on petroleum trading covers Vietnamese businesses only.

Idemitsu Kosan more than one year ago decided to cooperate with KPI, the oil & gas from Kuwait to establish a joint venture – Idemitsu Q8 – with a 50/50 capital contribution structure. The joint venture has plans to distribute (retail and wholesale) petrol products through the network to be built throughout the country.

Hiroaki Honjo, general director of Idemitsu Q8, said its joining the retail market would help improve the sources of supply for Vietnam.

He said after the filling station opens in Thang Long Industrial Zone in Hanoi, the company is considering expanding its network in the north and south of the country.

For a long time, petroleum retailing has been the privilege of Vietnamese businesses. There are 29 retailers in the market, but the market is being controlled by a few big players, namely Petrolimex, PV Oil and Saigon Petro.

Therefore, analysts commented that the presence of Idemitsu Q8 would remap the market and create a real competition in the market. 

“It is quite understandable that foreign energy giants want to join the petroleum retail market. The more retailers there are, the bigger benefits consumers can get,” Ngo Tri Long, a pricing expert, said. 

The Japanese conglomerate contributes 35.1% of capital to the Nghi Son Oil Refinery in Thanh Hoa province. Therefore, its retail network will help consume Nghi Son’s products once the oil refinery enters commercial development, slated for the end of the year.

Some experts, anticipating that more foreign investors would jump into the petroleum retail market, have proposed to amend Decree 83 to fit the new circumstances.

However, Long said that there was no need to amend the legal document, though it only covers Vietnamese petroleum retailers.

“The decree has a provision that foreign businesses who trade petroleum products in Vietnam under the international treaties of which Vietnam is a member must comply with regulations stipulated in the decree,” he explained.

“This means that when joining the market, Idemitsu Q8 will also be covered by Decree 83. And if it holds more than 30% of the market, share, the State will intervene in pricing,” Long said.