The Ministry of Industry and Trade has asked local fuel traders to buy products of Dung Quat Oil Refinery as it is considered one of solutions to reduce trade deficit.
The ministry has ordered Petrolimex, Vietnam’s largest oil product trader, to double its purchase of oil from Dung Quat, the country’s first oil refinery.
According to the ministry, though this year’s trade deficit has been curbed at less than 20 percent of exports, there remain many latent risks.
At a press conference held on October 7 by the Vietnam National Oil and Gas Group (PVN), investor of Dung Quat Oil Refinery, to review the group’s production and business in the first nine months of the year, PVN general director Phung Dinh Thuc said the refinery currently has 70,000-75,000 tons of fuel in stock.
Comparing orders from local traders and the refinery’s present production capacity, the factory might have 750,000 tons of fuel in stock by the end of the year.
Mr. Thuc said the refinery is sitting on stockpiles because its output has exceeded the year’s plan by 25 percent.
The plan was made while the refinery was on trial operation, so it was set at a moderate level, he said, adding that at present, the factory runs at full capacity so the surplus is unavoidable.
“This is one of difficulties the factory has faced when it has been in a transitional period to come into stable operation,” he said.
When the refinery was on trial operation, to ensure sufficient supplies of fuel, Petrolimex, whose products account for 60 percent of Vietnam’s fuel market share, and other local fuel traders made plans to import 70 percent of the domestic demand and buy only 30 percent from Dung Quat Oil Refinery.
It means that traders can’t buy Dung Quat’s stock, because they have to execute already-signed import contracts.
Another reason the refinery has failed to sell its products is the sole distribution which PVN has given to Petrovietnam Oil Corporation (PVOil).
Fuel traders are not interested in Dung Quat fuel products because they have to buy them via PVOil.
Regarding this issue, Mr. Thuc said at the initial phase, when the refinery’s operation had yet to be stable, PVN wanted its subsidiary Binh Son Refining and Petrochemical Company, the refinery’s management unit, to focus on production only, therefore, it assigned PVOil to handle distribution.
He said to balance production with consumption, PVN will allow Petrolimex and Petec to join distribution together with PVOil.
Petrolimex and Petec will be able to buy Dung Quat products directly from Binh Son Refining and Petrochemical Company, he added.
For the refinery to maintain its production capacity but not sit on stockpiles, these distributors need to expand their storage systems that can contain 800,000-1,000,000 tons of products, he added.
The refinery, whose construction began in June 2005 in the Dung Quat Economic Zone in the central province of Quang Ngai, has an installed capacity of 6.5 million tons per year.
The refinery started test runs in late 2008 with a workforce of over 1,000 engineers and workers. On February 22, 2009, the plant debuted Vietnam’s first locally made oil products.
France’s contractors consortium Technip handed over the refinery to Binh Son Refining and Petrochemical Company for managing, operating, and trading products turned out by the refinery on May 30, 2010.
In the first nine months, despite the impact of the global economic downturn, PVN basically accomplished its annual plan, even surpassing some set targets.
PVN’s total turnover in the third quarter reached VND66.94 trillion. In the first nine months it earned VND186 trillion, equal to 114 percent of the 9-month target and 88 percent of the yearly plan.
PVN paid VND95.2 trillion to the State coffers in the first 9 months, 124 percent of the 9-month target and 99 percent of the yearly plan.
Crude oil exports in the first nine months earned US$5.67 billion, 125 percent of the 9-month target and 97 percent of the yearly plan.
The group increased its oil reserves to 66.6 million tons, doubling the yearly plan target. The group also signed 12 new contracts for oil and gas exploitation.
PVN is striving to achieve total output of 24 million tons by the end of the year.
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