Dung Quat oil refinery looks for special incentives

Dung Quat oil refinery looks for special incentives

The Danang People’s Committee has recently submitted a document to the government to report on the difficulties that the managing board of Dung Quat oil refinery are facing, requesting similar incentives that are applied to Nghi Son oil refinery.

Notably, according to chairman of Danang People’s Committee Tran Ngoc Cang, there is an oversupply of petroleum and oil in the market due to the two oil refineries, which makes it difficult for Dung Quat to sell its products.

“Nghi Son oil refinery sold its first batch of products in May 2018, at a time when the demand for petroleum and oil products was low, while the supply of Dung Quat oil refinery was plentiful, heavily impacting the sales of Dung Quat,” the report stated.

Besides, Dung Quat oil refinery is not given an exemption from the 5 per cent import tax on crude oil. Meanwhile, Nghi Son enjoys import tax exemption for its products.

Furthermore, Dung Quat oil refinery is facing difficulties in upgrading its production lines because the government refused to guarantee its loans. In addition, the Ministry of Natural Resources and Environment (MoNRE) has yet to approve the refinery’s environmental impact assessment report, even though the company claims to have completed all procedures.

In order to deal with the above difficulties, the Danang People’s Committee asked the government to adjust the import tax for crude oil from Azerbaijan – the main crude oil import market of Dung Quat – from the current 5 per cent to zero.

Besides, the city also proposed removing products processed from crude oil from the list of products not applied VAT for the refinery’s export products.

The refinery also wants to have financial autonomy in order to ensure fair competition.

Finally, the city’s leader proposed the government to issue another support policy, replacing the guarantee for loans, so that the refinery can mobilise capital to upgrade its refinery. Simultaneously, the leader of Danang asked the MoNRE to approve its environmental impact assessment report.

Opened in 2009, Dung Quat is the first-ever oil refinery in Vietnam with the capacity of 6.5 million tonnes of crude oil annually. So far the refinery has refined and sold more than 47.2 million tonnes of petroleum, meeting 40 per cent of the market demand.

The expansion is expected to be completed in 2020 and upon completion, the refinery’s capacity will increase by 30 per cent, or two million tonnes a year, to 8.5 million tonnes. This will be able to meet half of Vietnam’s fuel demand.