Dung Quat Refinery negotiations start

Thursday, Jul 02, 2015 08:12

A view of Dung Quat Refinery in Quang Ngai Province. The diesel stockpile of Dung Quat Refinery reached 120,000 cube metres at the end of June. — VNA/VNS Photo Ha Thai

HA NOI (Biz Hub) — Binh Son Refining and Petrochemical Company Limited (BSR) has started negotiating with wholesalers over Dung Quat Refinery's fuel products in the second half of this year.

The negotiations are held amid high inventory.

Dinh Van Ngoc, director of BSR, which is responsible for the management, operation, and business of Dung Quat Refinery, was quoted by Dau Tu (Investment) newspaper as saying that BSR had sent a working group to negotiate contracts with Petrolimex, one of the country's largest fuel wholesalers. Negotiations will be carried out with other wholesalers as well.

The negotiations follow wholesalers' recent hesitation over buying diesel from Dung Quat Refinery and a high stockpile of diesel as the selling price of the refinery's diesel climbed higher than the price of imported oil.

The price gap was attributed to preferential tax rates in line with the ASEAN Trade in Goods Agreement imposed on certain fuel products, including diesel and Jet A1, causing difficulty in the consumption of domestically manufactured products.

According to BSR, the diesel stockpile of Dung Quat Refinery reached 120,000cu.m at the end of June. Diesel has remained a major product of BSR, with an output of around 3.3 million tonnes per year, or 50 per cent of the refinery's total output, and BRS worried that high inventory might result in operation cuts.

PetroVietnam said that in March, several large wholesalers proposed to buy less petrol and oil from BSR than previously signed contracts in order to increase the import volume of diesel with lower prices under "Form D" – a certificate that proved ASEAN origin.

Under the trade pact, the import tax on diesel from ASEAN members was 5 per cent, compared with a 20 per cent tariff on diesel imports from non-ASEAN members.

According to a Reuters report published at the end of April, Viet Nam's diesel imports from Singapore jumped almost four-fold in the first four months of this year to 715,000 tonnes, compared with the corresponding period of last year, after a trade pact redrew oil flows.

Ngoc noted that BSR will propose the Ministry of Finance to revise tax rates on diesel and Jet A1 to ensure the competitiveness of Dung Quat Refinery's products against Form D products.

Dung Quat Refinery was the principal oil refinery project of Viet Nam, with a total investment of about US$3 billion and a capacity of 6.5 million tonnes of crude oil per year. — VNS

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