Vietnam gives thumbs down to state oil giant’s bid to monopolize market
Oil and gas behemoth PetroVietnam has demanded that all local fuel businesses be obliged to buy products of its refinery before purchasing from foreign sources, but the demand has been turned down by relevant ministries.
PetroVietnam is the developer of Dung Quat, the country’s sole operating refinery located in the central province of Quang Ngai, which is on the verge of close-down due to surplus supply.
The state-run oil and gas giant has thus insisted that local fuel wholesalers buy all of the domestically produced fuel products to save Dung Quat from a shutdown.
“Firms should only be given quotas to import fuel once the domestic supply is used up,” PetroVietnam said in the proposition.
The proposal is made based on estimates that Vietnam will churn out some 18.1 million cubic meters of fuel in 2018, whereas total demand is expected to be around 17.3 million cubic meters, or a supply surplus of 800,000 cubic meters.
As such a request may make PetroVietnam and its refinery a market monopoly, relevant ministries have shaken their heads.
The Ministry of Industry and Trade said the fuel consumption estimated by PetroVietnam is much lower than government data.
According to the development plan for Vietnam’s oil and gas sector in 2018-22, approved by the government in October last year, the country is forecast to consume 21.2-26 million cubic meters of fuel, instead of only 17.3 million cubic meters as per PetroVietnam’s calculation.
Meanwhile, Deputy Minister of Planning and Investment Nguyen Van Hieu said the proposal of PetroVietnam “is not in line with Vietnam’s commitments to the World Trade Organization.”
Setting quotas to restrict imports is only applied to four types of commodities, namely cigarette materials, poultry eggs, unrefined and refined sugar, and salt, the deputy minister said in a report.
“By forcing local businesses to purchase the entire domestic fuel supply, PetroVietnam will become a monopoly in supplying fuel products in the country,” the report notes.
In a separate development, Vietnam’s largest fuel wholesaler Petrolimex said on Thursday it enjoyed an enormous pre-tax profit of VND3.76 trillion (US$167.86 million) in 2015, more than ten times the 2014 figure of VND321 billion.
The company posted the solid profit growth even though its revenue dropped 29.1% from 2014 to VND146 trillion (US$7 billion) on account of slumping oil prices.
The pre-tax profit generated from the fuel business of Petrolimex, which also operates in the fields of mechanics, construction and insurance, was VND1.98 trillion (US$88.39 million), or only VND222 per liter of gasoline.
The company said it managed to post a higher profit as the import fuel prices were regulated more commensurately with the market developments in 2015 than a year earlier.
