VN oil and gas industry expands domestic market

The oil and gas industry is boosting the production of petrol and fibre products to meet domestic demand in addition to developing sectors in which it holdsadvantages.

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VN oil and gas industry expands domestic market
Dung Quat Oil Refinery is producing 6.5 million tonnes of oil per year.

Improving quality and competitiveness

The Vietnam Oil and Gas Group (PVN) and its member companies are actively seeking solutions to put Dung Quat Biofuel Plant and Dinh Vu Polyester Fibre Plant into operation again. So far, Dinh Vu plant has increased its capacity to 12 draw textured yarn (DTY) production lines,which has produced nearly 3,000 tonnes and sold more than 2,500 tonnes of DTY products.

Chairman of the Board of Directors and General Director of PVTex Dinh Vu Yarn Plant, the management unit of Dinh Vu Polyester Fibre Plant, Dao Van Ngoc, said thatdomestic demand for fibre is estimated at 400,000 tonnes per year, while both PVTex and Formosa only meet 255,000 tonnes. The demand for DTY is 170,000 tonnes per year but the domestic supply reaches only 90,000 tonnes. Therefore, it is an opportunity for PVTex to re-operate all its factories to meet domestic demand. PVTex has signed 60 contracts with 20 customers, Ngoc noted.

Over the past few years, Vietnam’s textile and garment industry has always achieved export turnover of tens of billions of US dollars (over US$36.1 billion in 2018), but the value brought to the industry remains low due to 80% of its raw materials depending on imports. The stable operation of Dinh Vu plant will contribute to supplyingmaterials for the textile and garment industry and limiting imports. However, the plant must ensure the quality and prices of fibre.

According to a representative from the Vietnam NationalTextile and Garment Group (Vinatex), if the quality of domestically produced fibre is guaranteed and the products comply with market prices and payment and delivery commitments as in late 2014 and 2015 (when the Dinh Vu plant was still in operation), Vinatex will commit to gradually increasing PVTex's polyester fibreconsumption in its entire spinning systems to 100%, instead of at least 50%.

The fibre demand of Vietnamese enterprises expands by roughly 10 to 15% per year. With the current import demand of about 700,000 tonnes of cotton, the annual demand for polyester fibre will be around 400,000 tonnes.

 

Ngoc affirmed that after resuming its operation, PVTex is expected to raise its capacity to 25 DTY production linesin the second quarter of this year and will restart the whole plant in the fourth quarter of 2019. Previously, PVTex was likened to a "clinically dead patient" but now it is standing up and taking its first steady steps. Although PVTex still faces many difficulties and challenges, especially financial issues, labour quality, and competitiveness pressure, with its determination, PVTex will implement a number of solutions to enhance itsmanagement and training of employees, while reducingcosts to improve product quality, thus meeting the trust of its partners and customers.

Meeting market demand

The commercial operation of Nghi Son Oil Refinery witha capacity of 200,000 barrels per day (equivalent to 10 million tonnes per year) has demonstrated the efforts of PVN and its joint venture parties in promoting the domestic market, helping petrol enterprises to have stable source of supply and avoiding reliance on the world petrol market.

Nghi Son oil refinery sold nearly 2.6 million barrels of products of all kinds (estimated at 336,000 tonnes) from October 1 to 31, 2018. So far, Nghi Son plant has produced 12 types of products such as petrol Ron 92, Ron 95, jet fuel, diesel oil, kerosene, benzene, PP plastic beads and others which all meet technical standards and are sold toits trade partners for domestic and export purposes.

Representatives of Nghi Son Economic Board and Thanh Hoa Industrial Zones said that the operation of Nghi Son oil refinery contributed approximately VND8 trillion to the local budget in 2018. When the oil refinery reaches its full design capacity, it will meet 40% of domestic petroldemand, contributing to ensuring national energy security and creating spillover effects in attracting investment in industry, especially supporting industries after petrochemical refining and continuing to makecontributions to the local budget in the coming years.

PVN and its member company Binh Son Refining and Petrochemical Joint Stock Company (BSR) (the managing unit of Dung Quat oil refinery) are working to expand thecapacity of Dung Quat oil refinery to 8.5 million tonnes per year (equivalent to 192,000 barrels per day) so that it can meet roughly 35% to 40% of domestic demand.

According to Chairman of the Vietnam Petroleum Association (Vinpa) Phan The Rue, Vietnam's petrolmarket is expected to grow at 7-10% per year in the future, while the annual demand for petrol is estimated at approximately 16-17 million tonnes. The stable operation of Nghi Son oil refinery along with the annualcapacity of Dung Quat oil refinery at 6.5 million tonnes of petrol products will jointly meet 65-70% of domestic petrol demand, helping businesses to take initiative in finding the source of supply, while avoiding dependence on global petrol prices.

The Vietnamese petrol market currently has 29 wholesalers and hundreds of distributors but it is not highly competitive as the country only has one price level of petrol, resulting in unfair competition in holdingmarket segments and increasing business risks, among others.

PVN said that Vietnam had to import a large volume ofpetrol in the past, leading to partial surplus or shortagesdue to the seasons, weather, price fluctuations, and otherfactors, which also affected the balance of supply and demand. When the domestic supply is available and imported petrol is no longer the dominant factor in the domestic market, enterprises will be more proactive in their business activities.

Petrol wholesale enterprises are importing petrolaccording to minimum import quotas which they are allocated. Therefore, products produced from Nghi Son and Dung Quat plants must compete equally with imported products with the prices based on the market rules if they want to sell their products. In addition, PVN is also making efforts to completely meet the domestic market demand in order to ensure energy security and reduce social costs.

Nhan Dan

 
 

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