Fuel supply forecast to outpace demand in 2018

Dung Quat in Quang Ngai Province can satisfy some 30% of local demand and fuel trading companies import the remainder.

Oil and gas import prices have fallen due to tariff cuts given the free trade agreements Vietnam has signed. Furthermore, the global price has slumped due to the oil glut.

According to PVN, when Nghi Son oil refinery begins commercial operation in 2017 and reaches its maximum capacity in 2018, annual local supply would amount to around 17.6 million cubic meters, with 7.27 million cubic meters from Dung Quat and 9.62 million cubic meters from Nghi Son. The figure does not include the projects using condensate.

Meanwhile, the market is estimated to need around 17.33 million cubic meters of gasoline, diesel and jet fuel in 2018 based on domestic demand growth of 3% a year. Therefore, the combined supply from the two refineries and other sources would meet domestic demand while diesel would be redundant.

Vietnam still has four other oil refining projects in Vung Ro, Nhon Hoi, Long Son and Can Tho. Aside from the Can Tho project which is facing license withdrawal, the remaining projects are under perfunctory construction because of global market volatility.

Finance Ministry backs tax reduction for Dung Quat refinery

The Ministry of Finance has thrown its weight behind a proposal of Binh Son Refining and Petrochemical Company Limited (BSR) to cut import duties on products of Dung Quat Oil Refinery.

The duty reduction is expected to enable products of the BSR-operated refinery to compete with imported fuels as tariffs imposed on gasoline, diesel and jet fuel (Jet A1) imported from other ASEAN countries have been halved from 20% in accordance with Vietnam’s commitment to the ASEAN Trade in Goods Agreement (ATIGA).

A duty of 10% is applicable to fuels imported from the Republic of Korea in accordance with a bilateral free trade agreement between Vietnam and the Northeast Asian country.

With such duty cuts, prices of imported fuels from the markets are lower than those of products processed in the central province of Quang Ngai since the latter are subject to import tariffs of at least 20%.

The tax reductions resulted in a big differential between the normal import tariffs and the preferential tariffs of FTAs, Deputy Minister Do Hoang Anh Tuan said.

Tuan was cited by the local news site VnExpress as saying that the tariff cut proposal for products of Dung Quat was rational. “This ensures a reasonable level of protection in accordance with Vietnam’s commitments specified in the FTAs the nation has signed with partners,” the deputy minister said.

The Ministry of Finance will propose the Government remove the mechanism to subsidize Dung Quat in case the import tax rate falls to below 7%.

Tuan said after the FTA between Vietnam and the Republic of Korea came into force late last year, the ministry would propose amendments to fit the current market mechanism and guarantee equality between domestic and foreign enterprises.

The amendments will be made in a way that helps Dung Quat fulfill obligations in line with the tax laws and the mechanism to cover expenses for Dung Quat if the import tariff is lower than 7%.

Earlier, Vietnam National Oil and Gas Group informed the Government Office and the ministries of finance and industry-trade of mounting inventories at Dung Quat.

The huge inventories were attributable to the duty reductions for fuel imports, according to a document BSR sent to the Government and the ministries of finance and industry-trade.

BSR chairman Nguyen Hoai Giang warned that the oil refinery could be shut down if import tax on its products was not revised down.