The government has approved the allocation of over VND8.24 trillion (US$338 million) to state energy group PetroVietnam (PVN) to offset the offtake prices for products provided by the Nghi Son petrochemical complex, Vietnam’s largest petrol and oil refinery.

The facility, officially known as Nghi Son Refinery and Petrochemical LLC (NSRP), is a joint venture that commenced commercial operations in December 2018.

With a total investment of $9 billion, it has an annual capacity of processing 10 million metric tons of oil.

PVN holds more than 25 percent of the capital, with the rest having been contributed by Kuwait Petroleum International, Japan-based Idemitsu Kosan Co. Ltd., and Mitsui Chemical International.

According to a 10-year agreement signed between the investors and the Vietnamese government, PVN must buy any products that NSRP wants to sell for the same price as imported products plus seven percent for refinery products, five percent for LPG, and three percent for petrochemical products.

During those 10 years, if Vietnam lowers its import tax on gasoline to a level below its Most Favored Nation (MFN) tariff, PVN must be on the hook to compensate for any discrepancies.

In recent years, Vietnam has been successful in reducing its import tax on gasoline to a level lower than its MFN tariff.

As a result, during the sixth National Assembly (NA) sitting last November, the NA deliberated on the price compensation for NSRP, including the outstanding balance for the 2018-23 period, which amounted to over VND8.24 trillion, plus an anticipated amount of approximately VND9.65 trillion ($396 million) for 2024, according to news site VnExpress. 

The NA passed a resolution, approving only compensation for the latter.  

On December 29, Deputy Prime Minister Le Minh Khai signed a budget estimate decision which allocated VND8.24 trillion to PVN for compensating product offtake during the period from 2018 to 2023, VnExpress reported.

In 2023, NSRP produced nearly 7.6 million metric tons of oil and petrol products, according to the Vietnam News Agency.

The company achieved a net revenue of $6.4 billion last year and contributed $820 million to the state coffers.

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