Vietnam’s sole oil refinery, plus future plants, not meant to lower fuel prices

Refineries are built to only ensure energy security in Vietnam, an insider has said

A corner of Dung Quat Oil Refinery in the central province of Quang ngai

The operations of Vietnam’s only refinery Dung Quat, and other facilities to be built in the future, will not help reduce the retail prices of petroleum products domestically, according to Nguyen Hoai Giang, chairman of the board of directors of state-owned Binh Son Refining and Petrochemical JSC, which runs the refinery.

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“We have never said domestic gasoline prices will go down thanks to Dung Quat Oil Refinery. All oil refineries in the world are not built to reduce fuel prices,” Giang said in an interview with Tuoi Tre (Youth) newspaper earlier this week.

He further explained that Dung Quat was constructed so that Vietnam can make petroleum products by refining crude oil domestically, just in case any economic, political and social turmoil happens in the world that may cut the supply of fuel to Vietnam.

In other words, Vietnam would sustain any shortage of petroleum product supply, he said.

So cutting fuel prices is not the main goal when building Dung Quat, or any oil refineries in the future, as they are set up mainly to ensure energy security and to form the backbone of other related industries, Giang added.

Based on the petrochemical industry, Vietnam will promote the development of other industries and services to develop the industrial manufacturing sector in general, he said.

If fuel prices fall, people may try to illegally sell locally refined petroleum to neighboring markets for profit, Giang said.

Vietnam has planned to spend US$1.8 million expanding Dung Quat, which will help raise the annual capacity of the plant to 8.5 million cubic tons from 6.5 million cubic tons and thus make it more efficient, Giang said.

On August 28, Binh Son reached a deal with the UK’s Foster Wheeler Energy Company Limited Amec for the expansion of Dung Quat from next year until 2021.

Oil refineries in the world have been upgraded in the last few decades, including those in Russia, the U.S., and Japan, Giang said.

Once a plant is built, it is required to be upgraded or expanded after 5-10 years to optimize its operations.

The first step is always constructing a plant and assessing it, and on that basis, the operator often takes the second step to upgrade it, the board chairman said.

Moreover, the upgrade of Dung Quat will enable the plant to process crude oil commonly used in the world, instead of the 100 percent crude oil taken from the Bach Ho field off Vietnam’s southern coast.

Sweet crude oil exploited from Bach Ho is among the most expensive in the world, as it is light with almost no sulfur, and just needs to be processed a little for immediately use.

In contrast, Middle East sour oil needs more processing for use.

As previously calculated, Vietnam needed over $5 billion to establish a plant that can process Middle East sour oil, which the country could not afford at that time as it had only $2 billion ready to be spent on its first oil refinery, Nam added.

Minister and Chairman of the Government Office Nguyen Van Nen on September 1 turned down a proposal by the Ministry of Finance and the Ministry of Industry and Trade to increase crude oil exploitation output by 1-2 million more cubic tons to help Vietnam achieve annual GDP growth of 6.2 percent.

In the context of far lower oil prices, the increase in output will not contribute much to the national coffers, while affecting national energy security, Nen said.

The average production cost of a barrel of crude oil in Vietnam is lower than the average price at present, and the crude oil export quote of the country is around $53 per barrel, he said.

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