Vietnam’s much-touted E5 bio-fuel projects have virtually ground to a halt as Vietnam National Oil and Gas Group’s (PVN) three E5 factories have remain shut while domestic consumers have turned their back on the fuel.

According to a Government roadmap, all gas stations in Hanoi, Haiphong, Quang Nam, Quang Ngai, Danang, HCMC, Can Tho and Ba Ria-Vung Tau are required to sell E5 rather than RON 92 gasoline from early June. In other parts of the country, half of the pumping stations must have the bio-fuel available. E5 contains 95% petrol and 5% ethanol.

However, E5 consumption is woefully low while ethanol production costs are high, prices of fossil fuels are on the wane, and sanctions against fuel trading firms failing to sell E5 are not strict.

In a statement issued on Friday, PVN said its E5 facilities have suspended production due to rising costs and poor consumption. PVN has developed three E5 projects as part of a biological energy development scheme of the Government.

The Binh Phuoc Ethanol Plant is invested by Phuong Dong Biological Energy Co Ltd, Japan’s Itochu Corporation, Licogi Co and PV Oil with a respective stake of 49%, 22% and 29%. While it was on the drawing board, the world oil price was as high as US$140 per barrel but the current level is around US$50 per barrel.

Therefore, the E5 bio-fuel price is higher than that of fossil fuel, causing losses for E5 producers.

Worse still, ethanol factories were built in 2008-2010 when the price of cassava, a key material for ethanol producers, was about VND2,000 VND per kilogram. Since 2011, the cassava price has stayed at above VND3,500 and briefly soared to VND4500-5000 per kilogram.

Itochu Corporation has transferred its stake in the Binh Phuoc Ethanol Plant to Toyo Thailand Co.

There is another E5 plant in Quang Ngai Province, which PVN members developed while the oil price was US$140 per barrel. But the facility’s operations have been choppy since it was commissioned in early 2014. It was operational just four times last year with a total of 36 days out of 210 days designed and turned out less than 7,000 cubic meters of ethanol, about 12% of its capacity.

Ethanol is mainly sold to PV Oil to make E5 and the rest goes to other customers. The facility stopped production in late April due to low E5 demand.

The third E5 project is in the northern province of Phu Tho with 39% of capital sourced from PV Oil. Investors decided to suspend the project due to the oil price plunge.

PVN said the E5 projects of other investors have the same fate.

SGT