The People's Committee of Quang Ngai Province, home to the Binh Son Refinery and Petrochemical Joint Stock Company (BSR), one of the country's largest petrochemical enterprises and the province's key economic lifeline, has reported to the Prime Minister's Office that the country should prioritise the use of gasoline and diesel oil from domestic suppliers and reduce imports in light of crumbling demand during the pandemic.

The central province's report to the Government said as the country attempts to contain the novel coronavirus in its fourth outbreak (since late April) major cities and towns across the country including the capital city of Ha Noi and the southern largest economic hub HCM City, have one after another, gone into lockdown. This has sent domestic demand for gas and oil nose-diving at least until the end of the year.

The sudden fall in demand has made traders stop buying gas and oil. In July alone, deliveries for some 230,000cu.m of gas and oil have been either delayed or cancelled, which has caused BSR's inventories to balloon rapidly within a short period of time. As of now, the refinery is holding onto over 200,000cu.m, or 1.2 million barrels, of petrol products and nearly 400,000cu.m, or 2.4 million barrels, of crude oil.

To make matter worse, deliveries for August have also been forecast to drop by 40-50 per cent as many traders have not made plans with BSR for their purchases.

Since August 3, the refinery has been forced to operate at 90 per cent capacity, its minimum technical efficiency. BSR has also been forced to send 25,000cu.m of gasoline into storage and expected to make room for another 100,000-120,000cu.m of products in August. This, however, only offered a temporary measure as storage space has been snatched up fast. Once it runs out of storage, the refinery will have no choice but to shutter operations, which will incur huge costs for the enterprise, said the report.

Another refinery, the Nghi Son Refinery in Thanh Hoa Province, has been reportedly dealing with the same problem.

Meanwhile, the country's import of petroleum products still remained high, making it even more difficult for domestic refineries to find a way out. Viet Nam likely will find itself with a large surplus in supply in the coming months across all of its cities and provinces, said the report.

BSR, however, has been reportedly doing well during the first six months of the year. The refinery reported net revenue of VND27.8 trillion (US$1.2 billion) during the second quarter of 2021, and after-tax profit of VND1.7 trillion, despite rising operational costs across the board, a stark contrast to performance during the same period last year when BSR reported VND1.9 trillion in losses. — VNS