No projection of E5 biofuel production results in failure: Experts

According to experts, the E5 biofuel production project is in a dire situation due to many factors including no projection.

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A corner of Tung Lam ethanol factory in Dong Nai Province

Experts said that the failure of E5 biofuel production projects was not only from investors and distribution businesses but also from subjectivity and lack of reflection and projection during implementation. As a result, the foreseeable consequence is that the project and factories have been destroyed!

At many gas stations in Hanoi today, when people have a need to buy fuel, they almost only fill up with RON95 gasoline and very little with E5RON92 biofuel (E5 gasoline).

At the gas station on To Huu Street in Hanoi’s Thanh Xuan District, during rush hour, although there is a long queue, many people still wait to fill up with RON95 gasoline. Meanwhile, E5 gasoline was once widely deployed in Dong Nai Province but now this type of gasoline is nowhere to be seen, and even many gas stations have removed the E5RON92 gasoline pump.

Similarly, in Ho Chi Minh City, which was once a large market for E5RON92 gasoline when it was put on sale, according to the latest statistics of the Ho Chi Minh City Department of Industry and Trade, it is still being sold quite modestly. For instance, Petrolimex has 47/73 stores selling E5RON92 gasoline; Saigon Petro has 3/5 stores; Cu Chi Trading Company sells all 15/15 stores; Comeco Petroleum Supply Joint Stock Company has 9/24 stores.

A leader of Vietnam Oil and Gas Group (PVN) has recently said that businesses must be profitable before they can sell. Currently, the places that still sell both E5RON92 and RON95 gasoline are large distribution networks such as Petrolimex, PVOil, and Military Petroleum Corporation. However, the consumption ratio of E5 gasoline is not as high as expected and even tends to decrease steadily.

Regarding the reasons why E5 gasoline is increasingly falling behind in the market, a representative from the Ministry of Industry and Trade cited the main reason as the unattractive selling price of E5RON92 due to high environmental protection taxes, which ultimately affect the retail price.

Specifically, the environmental protection tax for E5RON92 is set at VND3,800 per liter, equivalent to 95 percent of the environmental protection tax for mineral-based RON92 gasoline, even though the environmental benefits of biofuel are better.

According to Mr. Ngo Tri Long, former Deputy Director of the Ministry of Finance’s Institute of Market Research and Price, when the price difference between E5RON92 and RON95 gasoline is only around VND500-VND1,000 per liter, it doesn’t encourage consumers to choose biofuel.

Mr. Ngo Tri Long posed the question that if the price of biofuel is consistently at least VND2,000 per liter cheaper than mineral-based gasoline, would consumers switch to buying biofuel? A representative from Saigon Petro and PVOil also expressed the opinion that to make E5RON92 more attractive, a significant price gap compared to RON95 gasoline is necessary.

Intending to ensure energy security, environmental protection, reducing greenhouse gas emissions, and creating stable outlets for agricultural products, the Prime Minister of Vietnam issued Decision No. 177/2007/QD-TTg approving the “Biofuel Development Plan until 2015, with a vision to 2025."

According to this plan, the production of ethanol and vegetable oil would reach 250,000 tons (blended into 5 million tons of E5 and B5) by 2015, meeting 1 percent of the country’s petroleum demand. By 2025, the production of ethanol and vegetable oil will reach 1.8 million tons, satisfying approximately 5 percent of the national petroleum demand.

The Ministry of Industry and Trade identified 7 planned and invested biofuel production plants across the country namely Dung Quat, Binh Phuoc, Phu Tho, Dai Tan (Quang Nam Province), Dai Viet (Dak Nong Province), Ethanol Plant Dak To (Kon Tum Province), and Ethanol Plant Tung Lam (Dong Nai Province).

Among these, Dung Quat, Binh Phuoc, and Phu Tho are the three largest plants, invested in by member companies of Vietnam Oil and Gas Group (PVN). Furthermore, to open up the market for E5 biofuel and gradually replace conventional gasoline, the Ministry of Industry and Trade proposed to the Prime Minister to allow the blending of biofuel (ethanol) with traditional fuel (RON92 gasoline) in 2017.

Accordingly, the government allowed the blending of these types of fuels to create E5RON92 gasoline for the market from January 1, 2018, until now. It was explicitly stated that only the production and business of two types of gasoline, E5RON92 and mineral-based RON95, are permitted.

At the time of implementing the blending policy, the consumption of E5RON92 gasoline increased significantly, accounting for 42 percent of the total domestic gasoline consumption while RON95 gasoline accounted for approximately 58 percent.

Among the 26 leading ground fuel traders, seven have E5 blending systems. These traders include Vietnam National Petroleum Group (Petrolimex), Vietnam Oil Corporation (PVOil), Ho Chi Minh City Gas and Oil Company (Saigon Petro), Military Petroleum Corporation, and Nam Song Hau Petroleum Investment and Trading Joint Stock Company.

Regarding the number of biofuel blending stations, there are approximately 29 stations nationwide with a total blending capacity of about 6.5-8.6 million cubic meters per year. The fuel supply from this blending system is sufficient for the entire national market, distributed through nearly 17,000 retail outlets.

However, since then, some plants have either stopped operating, remained inactive, or faced difficulties. Meanwhile, E5RON92 gasoline consumption has gradually declined; for instance, around 3.3 million cubic meters were sold in 2019, 2.5 million cubic meters in 2020, a similar trend in 2021, approximately 1.5 million cubic meters in 2022, and only about 1 million cubic meters in 2023.

According to Head Phan Van Chinh of the Domestic Market Department under the Ministry of Industry and Trade, the total supply of various types of gasoline, including imports, domestic production, and blending, is estimated to be around 26.02 million cubic meters in 2023.

Therefore, based on the consumption figures mentioned, if the government make a comparison to the benchmark of 2023, the consumption of E5RON92 gasoline is only about 1/26 of the total, which is a very small proportion, said Mr. Phan Van Chinh.

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