FDI energises petrol market

The Japanese-Kuwaiti joint venture will locally distribute petrol in 2017

Japanese company Idemitsu Kosan Co., Ltd and Kuwait Petroleum International Ltd (KPI) will distribute petroleum products in Vietnam in early 2017, with the first petrol station near Noi Bai International Airport in Hanoi.

The joint venture, named Idemitsu Q8 Petroleum Limited Liability Company, will operate in the import, wholesale, and retail of petroleum products, mainly through the construction and management of service stations across Vietnam.

Currently, Vietnam does not allow foreign investors to invest in petrol retail. Idemitsu Kosan and KPI’s distribution right was accepted under the condition that they partake in building the Nghi Son Petrochemical Complex in Thanh Hoa province, in which KPI and Idemitsu hold a 35.1 per cent stake each, with the remainder held by state-owned PetroVietnam.

According to Nguyen Tien Thoa, former head of the Price Management Department under the Ministry of Finance, the participation of Idemitsu and KPI will elevate the retail and wholesale of petrol products in Vietnam to a new level with much more competition. “This competition may, I think, bring more benefits to customers. However, we have to wait for the reality,” Thoa said.

Foreign retailers, Thoa said, would be able to compete with domestic retailers mainly on quality, services, price, knowledge, and management experience.

With an increased profile in the oil and gas industry, foreign investors would not merely bring greater financial resources to the domestic sector, they would also offer experience in management and distribution, Thoa said.

Nobuyuki Nakamura, chief representative of Idemitsu Kosan in Hanoi said that the Nghi Son Petrochemical Complex is in the last stage of construction and will be completed within 2016. The trial operation will commence in the first half of 2017, with commercial operation beginning in the year’s second half. “Firstly, we will open the first 10 petrol stations in northern provinces between 2017 and 2018. The network will be expanded to other provinces and cities after that,” Nakamura said.

Idemitsu stated that through the establishment of this petroleum product distribution company, the two companies will supply the growing Vietnamese market, where demand for petroleum products is expected to follow a steady upward trend, with the consumption at more than 16.5 million tonnes in 2015.

Idemitsu’s petrol stations that open in the beginning of 2017 will initially use an import petrol source with a maximum capacity of five million tonnes per year. They will shift to selling products made by Nghi Son when this complex is put into operation.

According to the Ministry of Industry and Trade’s (MoIT) data, as of now in Vietnam, there are 24 fuel wholesalers that import fuel or buy from the country’s sole operating refinery Dung Quat and sell in the domestic market.

In a related move, JX Nippon Oil and Energy Corporation (JX Nippon), another oil and gas giant from Japan, recently agreed to purchase an 8 per cent stake in state-run Petrolimex, which holds 55 per cent of the local petroleum retail market share. The acquisition shifts JX Nippon one step closer to building its first overseas oil refinery in Vietnam, and may even position it in the nationwide petrol distribution market.

Currently, Petrolimex, PetroVietnam’s PV Oil, and Saigon Petro are dominating nationwide petrol distribution with a combined market share of around 75 per cent.