Stricter fuel standards cause headache to major oil refineries

Major fuel trading businesses were recently required to supply diesel oil level 4 (Euro 4 standard) to the market no later than on January 1, 2018, a move which put Vietnam’s two existing refineries—Dung Quat and Nghi Son—into a tight spot.

The two refineries need more time to upgrade their facilities to reach the required standards.

Dung Quat, Vietnam’s first oil refinery based in the central province of Quang Ngai, had its initial investment project approved in 1997 and revised plan approved in 2005.

At the time the technical blueprint was approved, the products made by Dung Quat were ensured to meet or surpass contemporary quality requirements.

The first batch of products came out in February 2009 and the facility was ready for commercial operation from May 2010, with products strictly meeting Vietnamese quality standard requirements.

In September 2001, following the enactment of the prime ministerial Decision 49/2011/QD-TTg (Decision 49) which requires the supply of Euro 4 fuel products to the market starting from January 2017, Dung Quat has set to upgrading and expanding its production lines.

For a combination of factors, its targets for quality improvement and capacity expansion have yet to be fully completed.

Dung Quat’s upgrade and expansion project was scheduled for completion in 2022.A recent report by domestic state-owned fuel giant and Dung Quat’s management authority PetroVietnam stated that even when the upgrade and expansion was finalised, Dung Quat could only produce and supply petrol and diesel oil meeting Euro 2 standards.

With the current production capacity of 2.48 million tonnes of petrol and 2.33 million tonnes of diesel oil per year, Dung Quat can satisfy only part of the local fuel demand.

Nghi Son complex (NSRP), based in the north-central province of Thanh Hoa, has run into similar difficulties.

NSRP’s investment project was approved in April 2008 and its master technical design was approved in December 2009.

The bidding process took place in March 2009. This means all important steps for the project’s deployment were implemented before the enactment of Decree 49. 

According to the blueprint, the products made by NSRP will met or surpass existing quality requirements. The oil refinery is to begin test-runs and market its first batch of products within this year.

Once operational, NSRP will be producing 1.47 million tonnes of common diesel oil and 2.2 million tonnes of top-grade diesel oil per year.

Both Dung Quat and Nghi Son oil refineries will have a large part of their production falling short of Euro 4 standards, making it hard for these two oil refineries to satisfy the recent requirements on Euro 4 standards.

Earlier, Notice 398/TB-VPCP dated December 2016 of the Government Office stipulated that passenger cars and buses with diesel engines shall be applied Euro 4 emission standards from January 1, 2018, while the deadline for trucks with diesel engines will be extended to 2022.

Deputy Prime Minister Trinh Dinh Dung, however, via Document 436 TTg-CN dated March 2017, asked the Ministry of Industry and Trade to require major fuel trading businesses to work out a plan ensuring the supply and distribution of Euro 4 and 5 fuel products in the market to meet the requirements of Decision 49.

Right in this year’s fourth quarter, these firms must improve infrastructure conditions and other commercial factors to be able to supply Euro 4 diesel oil to the market no later than January 1, 2018.