Distributor resistance hampers ethanol fuel

Efforts to increase Vietnam’s ethanol fuel use is hampered by reluctant distributors

Hai requested that an inspection team be set up to work with ethanol plants and distributors to overcome obstacles so as ethanol fuels could be sold in seven cities and provinces of Vietam by the end of 2014 and across the country by the end of 2015.

“The inspection team will have to review related policies, submit incentives and carry out research if they are to reduce the cost of ethanol fuels and increase their competitiveness in Vietnam,” Hai said.

Just a year and a half before the deadline, difficulties continue to hamper the use of ethanol fuels in Vietnam.

According to Hoang Thi Long Van, deputy head of Petro Technical Division under the state-run Petrolimex, the company has not set up filling stations or blending systems yet.

“We have to consider very carefully different options in order to choose the best way to implement the government’s plan to distribute ethanol fuels in Vietnam,” Van said. 

She added that Petrolimex had submitted to the Ministry of Industry and Trade (MoIT) a plan to distribute ethanol fuels in a 100 page document with different scenarios.

Petrolimex now distributes petroleum to around 50 per cent coverage of the nation, however it still has no stations providing ethanol fuels.

“We have been operating in major rural areas and this requires totally different solutions to make the use of ethanol fuels effective,” said Van, adding that no incentives had been offered to encourage distributors to circulate ethanol fuels in Vietnam.

Phung Dinh Thuc, chairman of the state-run PetroVietnam, also claimed that implementing the Vietnamese government’s plans would be far from easy because distributors would not want to pay more money to update their facilities.

“This is a reality and our bio-fuel factories are operating in a very difficult business because their products are not consumed domestically, and if these plants export their products abroad, they will have no profit,” Thuc said.

However, Thuc affirmed that these difficulties would be overcome by 2014 when the compulsory use of ethanol fuels spread to seven cities and provinces before going nationwide in 2015.

“This is a necessary change because the use of ethanol fuels brings many advantages in the long term, so we must encourage distributors to be more active to prepare for this process. Distributors will have to invest in upgrading their facilities,” said Thuc.

According to the roadmap, compulsory use of bio-fuels will start from December 2014 for motor vehicles in Hanoi, Ho Chi Minh City, Haiphong, Danang, Can Tho, Quang Ngai and Ba Ria-Vung Tau. From December 2015, it will be used widely across the country.

PetroVietnam and its partners are investing in three ethanol factories in northern Phu Tho, central Quang Ngai and southern Binh Phuoc provinces with the total capacity of 300,000 cubic metres per year.

Of those, Quang Ngai and Binh Phuoc plants were put into operation in 2012’s second quarter. But with little opportunity to sell ethanol fuels in Vietnam, the factories’ output remains low.

Currently, only three out of more than 10 petroleum wholesalers in Vietnam trade bio-fuel E5, including PV Oil, Petec and SaigonPetro with the total of 175 stations selling ethanol fuels in 34 cities and provinces.

By the end of 2012, there were six plants engaging in bio-fuel production in Vietnam. Their capacity is estimated at 535 million litres per year. However, only 20 per cent of this is consumed in the country, 80 per cent is for export to Japan, Korea and the Philippines at prices barely covering production costs.

The MoIT forecast that Vietnam will need around 6.88 billion litres of bio-fuels by 2015, with the figure climbing to 8.313 billion by 2020.