VietNamNet Bridge – Four enterprises, which are private businesses and joint stock companies, have got the licenses from the Ministry of Industry and Trade to operate as the petroleum distributors in the domestic market. The number of the distributors would still be rising.

All the existing petroleum distributors complain that they incur losses because they have to sell products below the cost prices as requested by the government. However, none of them intends to leave the market.

What the government and people hear most from petroleum distributors are that the distributors incur loss and insist on the selling price increases.

Holding more than 90 percent of the market share, the big guys including Petrolimex, PV Oil, Mipec, Saigon Petro, Dong Thap Oil and Gas Trade Company have been dominating the market.

17 and more

With the licensing to the new four enterprises, Vietnam now has 17 big petroleum distributors. Vo Van Quyen, Director of the Domestic Market Department, an arm of the Ministry of Industry and Trade, said the licensing aims to create a more competitive market which would benefit consumers.

The threshold would be exceeded in the near future, as some petrochemical and oil refinery investors have seen the “green light” on to them to set up petroleum trade companies.

Under the Vietnam’s WTO commitments, Vietnam doesn’t have to open its petroleum retail market to foreigners. However, setting up petroleum trade companies seems to be a “reward” by the government of Vietnam to the foreign invested oil refinery projects’ investors.

The Nghi Son petrochemical and oil refinery project, in which foreign investors hold 75 percent of the stakes, and the 100 percent foreign invested Vung Ro Oil Refinery project, for example, have got the nod from the government to set up distribution companies which would distribute the products to be churned out by them.

Nghi Son expects to become operational by 2017, with the capacity of 10 million tons of crude oil a year. Vung Ro would run at the capacity of 8 million tons. Once Nghi Son is put into operation, the domestic production would be sable to satisfy 60 percent of the domestic demand. If so, the competition among the distributors would become stiffer.

Who will define the selling prices?

It would always be a very difficult task to define the retail petroleum prices.

The government’s Decree No. 84 stipulates that the selling prices would be defined based on the market supply and demand, and with the state’s management. The distributors have the right to set the selling prices. However, the decision on the next price increase must be made at least after 10 days since the previous price adjustment. In case the import prices decrease, the distributors must lower the selling price no later than 10 days.

However, since mid-2012, state management agencies decided to regain the power of setting the retail prices from the petroleum distributors after a long time of giving the power to them.

The big guys in the market -- namely Petrolimex, or PV Oil, of course, don’t want to lose the power. They have repeatedly insisted on the right to define the selling prices themselves, which would allow raising the retail prices as soon as the import prices increase; with no need to ask for the management agencies’ permission.

Doanh Nhan