Nghi Son asks to loosen requirements on petrol product quality

The decision on applying the Euro 4 emission standard on petrol products will put big difficulties for Dung Quat Oil Refinery and Nghi Son Oil Refinery; the latter would become operational in 2017.

The Prime Minister’s Decision No 49 released in 2011 says that the Euro 4 standard would be applied from January 1, 2017 and Euro 5 from January 1, 2022.

The application of the standard is believed to be ‘vital’ to improve market competitiveness in the future once countries in the region have also begun applying the standard.

Nghi Son in May 2015 admitted that the designed quality of products does not meet Euro 4 and Euro 5 standards as stipulated in Decision No 49.

The company said the further investment to upgrade the product quality to satisfy the emission standard plan would only be made after 2021 because of loan disbursement commitments.

Therefore, Nghi Son asked to loosen the requirements on products’ quality.

Some sources said Nghi Son does not intend to improve the products’ quality because the company has signed a contract with PetroVietnam under which PetroVietnam would be responsible for product consumption.

An official confirmed that PetroVietnam, on behalf of the government, signed a contract on product underwriting. However, he said, the contract comprises of a provision which says Nghi Son’s products must satisfy the requirements set for the moments when they are sold. 

Meanwhile, Nghi Son’s products cannot meet the Euro 4 emission standard, while about 1.5 million tons of DO oil only meets Euro 3 standard in sulfur content.

Regarding the Nghi Son’s proposal on loosening the emission standard requirements, PetroVietnam said the Government would still require Nghi Son to follow the roadmap on emission standard application. 

In case Nghi Son’s products cannot meet the standards by the timeline, PetroVietnam and Nghi Son will have to renegotiate the underwriting responsibility or discuss additional conditions for PetroVietnam to continue implementing the contract.

PetroVietnam is also the owner of Dung Quat Oil Refinery, while Dung Quat is also facing similar problems in product quality. Dung Quat’s products can only meet Euro 2 standard.

To meet Euro 4 standard, Dung Quat has to start the second investment phase when it sets up the workshops to filter heavier oil with more sulfur content than the oil from the White Tiger’s field it is now using.

However, a source said the second phase still cannot be kicked off now because of the failure of the plan on selling stake to Gazprom.