Vietnam refines oil, but petrol prices still high

02:10 PM @ Monday - 28 July, 2014
VietNamNet Bridge – Vietnam continues to sell its high-quality crude oil at high prices and buy crude oil cheaply from other countries for its domestic refinery.

Domestic production clearly has not helped Vietnam control petrol prices.

Azerbaijani oil and gas company SOCAR has signed a contract to provide 3.5 million barrels of Azeri crude oil to the Vietnamese Dung Quat Oil Refinery this year. It is expected that the oil supply would last until 2016.

Prior to that, in August 2010, SOCAR provided the first consignment of 400,000 barrels, or 65,000 cubic meters, to Dung Quat, which refines oil with 13 percent of import oil and 87 percent from the White Tiger field in Vietnam.

Output from White Tiger falls

A senior executive of the Binh Son Petrochemical Refinery Company, which is running the Dung Quat Refinery, said Dung Quat now uses oil from the two main sources, imports and oil from White Tiger oil field.

Dung Quat can churn out 6.5 million tons of products of different kinds. The crude oil from White Tiger can satisfy 80-85 percent of the materials needed.

An expert said that in fact, the designers of Dung Quat planned to use crude oil from White Tiger for the refinery process. However, things did not go as planned.

The construction of Dung Quat was first put into discussion in 1990, but only in 2009 could the refinery be put into operation.

Meanwhile, the exploitation output from White Tiger has been decreasing since then. As a result, Vietnam has to import crude oil to feed Dung Quat.

According to Ho Sy Thoang, former Chair and CEO of PetroVietnam, the national oil and gas group, Dung Quat can work with 10-20 percent of imported oil only.

The percentage of imported oil cannot be higher, because Dung Quat was designed to use simple technology which needs high quality crude oil.

“In 1997-1998, when Vietnam built Dung Quat, it was a difficult time. Therefore, we decided to use the lowest-cost technology. At that time, experts thought there was no need to use advanced technology as Vietnam had an abundance of high-quality oil from White Tiger,” Thoang said.

The senior executive of Binh Son Company revealed that Dung Quat would be enlarged twofold in the near future with the capacity raised from 6.5 million tons to 10 million tons of products per annum.

“This means that we will have to increase the crude oil import volume in the future,” he said.

No effect on domestic petrol prices

Le Dang Doanh, a renowned economist, noted that Dung Quat can only satisfy 30 percent of domestic demand; therefore, it cannot help the government control domestic petrol prices.

Meanwhile, the executive from Binh Son said that even if Dung Quat could satisfy 100 percent of the domestic demand, the domestic prices will not be influenced, because the domestic prices must go in line with the world’s prices.

This means that the petrol prices in Vietnam will still be higher than in other countries, including the US and regional countries such as Indonesia and Malaysia.

Thoang commented that the petrol prices would be still high if the tax rates on petroleum products continue to be high.

According to Doanh, the taxes and fees account for 32 percent of the petrol selling price.
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