Mekong Delta fishing boats shift to cheaper foreign fuel

HCMC – Many fishing boats in some Mekong Delta provinces such as Kien Giang and Ca Mau buy foreign fuel off the country’s southwestern coast as local fuel prices are prohibitively high, said a local industry and trade official.

Le Thi Nhat, deputy director of Kien Giang’s Department of Industry and Trade, told the Daily on the phone on Thursday that owners of fishing boats said offshore fuel was VND3,000 and VND5,000 per liter cheaper than the local product.

Instead of storing a sufficient volume of fuel for their long fishing trip on the high seas, boat owners pump just enough oil to travel from the shore to a designated area offshore to fill up the tanks, Nhat said.

If the situation continues, domestic fuel sales will be hurt.

At a recent meeting with the Ministry of Industry and Trade, Nhat raised this concern and asked for measures to cope with the issue.         

Meanwhile, the ministry’s market monitoring department has blamed lack of means, and financial and human resources for the failure to prevent fuel smuggling on the high seas.

She said offshore fuel smuggling is happening in Kien Giang and other provinces including Ca Mau.     

In the meantime, the Dung Quat Oil Refinery, the country’s first based in Quang Ngai Province, is struggling with a rising backlog of fuels, so it is seeking to sell about 140,000 cubic meters of A92, A95 petrol and diesel oil to Vietnam National Petroleum Corporation this month.

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Oil products pile up, no storage space

Vietnam’s first oil refinery is facing the problem of having huge stockpiles of products that it has no place to store.

The Dung Quat oil refinery has 750,000 tons of oil and gasoline products in stock and not enough space to store them, said Vu Quang Nam, deputy chief executive of state-owned oil and gas group

PetroVietnam. He told a Monday conference in Hanoi that the plant has been running at full capacity, or 30 percent higher than the plan for this year.

According to Petrolimex, a subsidiary of PetroVietnam that has more than a 50 percent share of the domestic fuel market, the refinery was not able to project its output accurately at the beginning of this year.

Petrolimex therefore had to sign contracts to import 70 percent of the fuel it needed and only planned to buy the remaining 30 percent from Dung Quat. These import contracts could not be canceled, the company said.

Deputy Minister of Industry and Trade Nguyen Cam Tu said fuel traders had placed import orders early this year to ensure sufficient supply for the market. But the refinery’s output was higher than expected, leaving the ministry with a difficult logistical problem on its hands, he added.

The ministry has ordered PetroVietnam and Petrolimex to work together and balance demand with domestic production and imports.

The Dung Quat refinery, which cost US$3 billion to build, is designed to supply about one-third of the country’s fuel demand this year. The government in August approved a plan to increase its annual capacity from 6.5 to 10 million tons.

Vietnam spent $4.9 billion on petroleum product imports in the first nine months, a 4 percent rise, while earning $3.7 billion from the sale of crude oil, down 22 percent year-on-year, according to the General Statistics Office.

Nguyen Hoai Giang, general director of PetroVietnam subsidiary Binh Son Petrochemical Refinery Co., the operator of the 140,000-bpd refinery, said Dung Quat has supplied 5.5 million tons of fuel products to the market since it began commercial production in February last year.

Giang admitted that the plant was having a problem with slow sales right now. However, it will continue purchasing crude oil and maintain its production schedule, he said.

In the long term local fuel traders should build more storage facilities with a total capacity of 800,000 to one million tons, then “there will be no problem,” he said.

Vietnam plans to build two more refineries, aiming at self-sufficiency in oil products by 2015. Previously, the country had to import all of its fuel products.

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Use of biofuels promoted for nation's motor vehicles

Bio-fuel, which emits 30 percent less carbon dioxide than other petrols,
should be more widely used in the country to protect the environment,
experts have said.

Petrol Vietnam Oil Corporation (PV Oil), which makes bio-fuel E5, said the petrol was harmless to vehicles.

Made from biomass, the fuel is a mixture of 95 percent of conventional non-lead gasoline and 5 percent ethanol.

Under a trial run by PV Oil, Da Nang Polytechnic University
and Toyota Ben Thanh, it was found that bio-gasoline E5 had no negative
effects on vehicle engines.

PV Oil also noted that
bio-fuel E5 could increase engine capacity by 3.3 percent compared with
other gasolines, without a change in consumption.

According to results obtained in research projects, bio-fuel E5 can be
used safely for most vehicles made after 1990 and has the same functions
as other kinds of petrols, according to Dr Nguyen Huu Luong of HCM
City Polytechnic University 's Chemistry Department.

Luong also said that not all bio-gasoline was good for the environment because it would depend on the way it was made.

Bio-fuel E5 produced by PV Oil has been on sale since the beginning of August at two gasoline stations in HCM City .

However, many residents lack information about the new petrol and were reluctant to use it.

Nguyen Thanh Nguyen, a seller at Gasoline Station 5 in Thu Duc
disitrict's Hiep Binh Chanh ward, said only one or two out of 10
customers wanted to buy bio-fuel. Every day, the station sells no more
than 100 litres.

He said customers bought bio-fuel because it was 500 VND per litre cheaper than other petrol.

Pham Long, Thu Duc district's Hiep Binh Chanh ward, said that he often used petrol A92 for his motorbike.

"I wouldn't dare use bio-fuel because I lack information about it."

It is estimated that 40 petrol stations will sell bio-fuel in HCM
City by the end of this year, and about 4,000 stations by 2012, of all
which are under PV Oil, Petec and others, said Ly Hong Duc, deputy
director of PV Oil.

Some organisations like PV Oil,
Polytechnic University 's Chemistry Department's Laboratory and the
Dong Xanh Company in Central Quang Nam province are conducting
research on producing bio-fuel with advanced technologies.

Tests show bio-fuel E5 has a higher octane rating than other
conventional gasoline, allowing for better fuel economy, engine and
environmental protection.

The Government has
identified the production of bio-fuel as a pivotal industry to ensure
energy security, reduce dependence on fossil fuels and protect the
environment./.

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Vietnam Airlines plans Dung Quat jet fuel purchase

National carrier Vietnam Airlines said it plans to switch to locally-produced jet fuel to save transport costs.

Le Hoang Dung, spokesperson for Vietnam Airlines, said the carrier will give priority to local products and it is completing “necessary procedures” to buy Jet A1 fuel from the Dung Quat refinery.

Using local fuel will ease pressure for payment in foreign currencies and also cut the cost of transporting and storing imported fuel, he said.

The first 4,500-ton batch of jet fuel produced by Dung Quat was sold to a Singapore-based unit of BP on Tuesday.

The refinery is expected to produce between 200,000 and 300,000 tons of the fuel every year to be sold in both local and foreign markets.

Dung said Vietnam Airlines operates 300 flights every day and  has a huge demand for jet fuel. He said the carrier will have to check the quality of Dung Quat’s jet fuel carefully before using it.

Another local airline, Jetstar Pacific, said it also plans to use local fuel products as long as they are of high quality.

“As the (Dung Quat’s) fuel has just been exported, we want to wait for responses from foreign buyers,” said Ta Huu Thanh, deputy general director of Jetstar Pacific. “It’s very important to choose the right jet fuel because it’s about the safety for a lot of people.”

Jetstar Pacific is currently supplied by Vinapco, Vietnam’s largest jet fuel supplier and a trading arm of Vietnam Airlines. Vinapco imports jet fuel from other Asian countries. It held a monopoly in the local market until February this year, when Petrolimex began selling fuel to airplanes.

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