PetroVietnam fears oversupply of petrol products, wants to restrict imports
28-09-2015 14:04:50+07:00
PetroVietnam fears oversupply of petrol products, wants to restrict imports
The national oil and gas group PetroVietnam has asked the government to apply necessary measures to restrict petrol imports so as to ensure the sale of products to be produced by the Nghi Son and Dung Quat oil refineries.
In a document to the Prime Minister some days ago, PetroVietnam admitted that it has met difficulties in finding consumers for petrol products from the two refineries.
PetroVietnam decided to ask for help from the Prime Minister because under the government’s commitments, PetroVietnam has the responsibility of underwriting all refineries’ petrol, diesel and LPG products.
According to PetroVietnam, when the Nghi Son oil refinery in Thanh Hoa province is put into commercial operation in 2017, and runs at maximum capacity in 2018, the total petroleum product supply for the domestic market will be about 18.1 million cubic meters.
Meanwhile, the total domestic demand for petrol, diesel and Jet A1 petrol would only be 17.3 million cubic meters by 2018.
Therefore, PetroVietnam said being responsible for consumption of Nghi Son’s products will be "a big difficulty for PetroVietnam", especially if Nghi Son’s products are more expensive than imports.
When imports have lower taxes in the future, the products from domestic refineries will be less competitive in the home market.
PetroVietnam has proposed that the government grant quotas for petroleum imports only when it is sure that all the products of Nghi Son and Dung Quat can be sold.
Dr. Le Dang Doanh, a renowned economist, said this was not feasible, because fair competition and no privilege are the principles of all free trade agreements that Vietnam has signed.
“The only solution to ensure the consumption of Nghi Son and Dung Quat products is to cut production costs to create competitive products,” Doanh said.
Dr. Do Duc Dinh, former head of the Institute for Africa and the Middle East Studies, also thinks it is unreasonable to force enterprises to buy domestically made products, because this may cause a monopoly.
Dr. Dang Dinh Dao from the Hanoi Economics University also commented that domestic oil refineries should think of reducing production costs to compete with imports rather than trying to force domestic consumers to buy their products.
“There must be competitiveness in the petroleum market, and it is necessary to encourage consumption of domestically made products by offering cheap products, not by creating a monopoly,” Dao said.
The $9 billion Nghi Son Oil Refinery Complex developed by PetroVietnam contributes 25.1 percent of capital, KPI/KPE (35.1 percent), Idemitsu Kosan (IKC) 35.1 percent, and Mitsui Chemicals 4.7 percent.
