MPI warns PetroVietnam proposal may create monopoly

The proposal was made by PetroVietnam after the Dung Quat Oil Refinery shouted for help, saying that it may have to shut down because of loss.

According to PetroVietnam, the total petroleum supply to the market by 2018 would be 18.1 million cubic meters, of which Nghi Son would provide 9.6 million cubic meters, Dung Quat 7.8 million cubic meters. Four plants that make petrol from condensate would provide 690,000 cubic meters.

Meanwhile, the total domestic demand for petrol, diesel and Jet A1 would be 17.3 million only, which means that the total supply would be higher by 821,000 cubic meters than the demand. Diesel alone would see demand exceeding by 849,000 cubic meters.

Fearing that key petroleum import corporations would prefer importing products from South Korea and ASEAN instead of using products from Dung Quat Oil Refinery, which would push Dung Quat against the wall, PetroVietnam has asked for the government’s help to boost the sales of Dung Quat’s products.

If the government approves the proposal, the government would only grant quotas to import petroleum products if it is sure that all domestic products can be consumed.

However, ministries have shown their disagreement with the proposal.

According to Tuoi Tre, the Ministry of Industry and Trade (MOIT) commented that the estimates by PetroVietnam about the demand by 2018 are lower than expected.

The oil & gas industry development strategy approved by the Prime Minister in October 2015 showed that Vietnam would consume 18-22 million tons of petroleum, or 21.2-26 million cubic meters in 2018-2022, not only 17.3 million cubic meters as estimated by PetroVietnam.

Meanwhile, the MPI’s document to the Prime Minister signed by MPI Deputy Minister Nguyen Van Hieu commented that ‘PetroVietnam’s proposal is come in line with Vietnam’s commitments when joining the World Trade Organization (WTO)’.

The ministry reminded that Vietnam, as a member of WTO, it can only restrict imports by imposing quota scheme on four categories of products, namely tobacco materials, poultry eggs, raw & refined sugar and salt.

MPI has also warned that if the government approves PetroVietnam’s proposal, PetroVietnam will become an enterprise which has the exclusive right in supplying domestically made petroleum products.

In the immediate time, in order to help ease difficulties for PetroVietnam, MOIT has asked petroleum distributors to prioritize to buy Dung Quat’s products based on market prices.

Dung Quat has complained that Vietnamese enterprises only sign short term (2-3 month) contracts with Dung Quat and they tend to cut the buy volume from Dung Quat.