What does Ministry of Industry and Trade say about the proposal to ban petrol imports?

illustration image. Source: Internet

Not giving a direct answer for the issue wether the ministry agreed or disagreed with the proposal of PVN, the Ministry of Industry and Trade analysed that currently, Vietnam has two oil refineries, namelyDung Quat Oil Refinery and the Nghi Son refinery and petrochemical plant (both have capital contributed by PVN), meeting more than 80% of domestic demand for gasoline.

Recently, due to the dual effects of the Covid-19 pandemic and the sharp drop in oil prices, domestic refineries faced difficulties in selling their products. To remove these difficulties as well as problems enterprises operating petrol and oil, comprehensive solutions are needed.

The principle is to ensure the harmonisation of the State’s interests, manufacturing enterprises, enterprises operating petrol and oil and citizens. At the same time solutions must be in accordance with regulations and agreements, as well as international treaties that signed by Vietnam.

Nguyen Viet Son, Director Petroleum and Coal Agency (Ministry of Industry and Trade), said that regarding enterprises manufacturing petroleum, it is necessary to research and implement solutions such as optimising and reducing operating costs; reducing production costs and it should have a flexible payment mechanism.

Adjusting production plans to meet market demands (cut capacity, adjust structure of product categories of oil refineries plant), export of domestic products that are not fully consumed.

Regarding focal enterprises operating petrolium, it needs to adjust their business plans to fit the market situation and demand for petrol and oil consumption; supporting domestic manufacturing enterprises by consuming the maximum amount of petrol and oil produced domestically.

For State management authorities, it is necessary to have solutions to support enterprises operating petrol and oil (promulgating tax and monetary support policies); encourage and call enterprises to enhance coordination and mutual support in manufacturing and operating business (focal enterprises trading petroleum should prioritise consumption of products manufacturing domestically instead of importing; enterprises manufacturing petrol and oil should have flexible sale policies and reducing prices).

On the sharp decline in prices of crude oil, Nguyen Viet Son further informed that during the session on April 21, the price of crude oil dropped but the oil price of US West Texas Intermediate (WTI) June 2020 on NYMEX (New York, USA) maintained at about $16-20/barrel and Brent oil price on ICE (London) at $21-25/barrel.

The domestic crude oil price of Vietnam is often referred to the price of Brent crude oil. The sharp fall in oil prices will seriously affect the key indicators of PVN.

According to PVN's calculations, if the average oil price in 2020 is $30/barrel, revenue will drop by 19% comparing to the year’s plan, reaching VND 520,000 billion (with the plan VND 640.9 thousand billion); State budget contribution will decrease by 38.4% compared to the yearly plan by VND 50.6 thousand billion (compared to the plan is VND 82.1 thousand billion).

On average, if the oil price drops by $1, total revenue of PVN will decrease by VND 4.6 thousand billion and the State budget payment will decrease by VND 1,000 billion compared to the plan.

Recently, the Ministry of Industry and Trade issued documents to direct the oil and gas industry/PVN to implement solutions to cope with dual effects of the Covid-19 pandemic and the sharp decline of oil prices.

Checking the whole plan of oil and gas lots, exploitation drilling wells and determining the feasible oil price level to make decisions on the continuation or suspension of low-output wells based on efficiency, protecting resources, ensuring State benefits and investors' benefits; balancing the output of drilling well which have goods good price to make up for the shortage of output of closed wells or reduced output.

Son emphasised that: “Reviewing all tasks and expected expenses for 2020; cutting down on outsourcing expenses, tasks that were not really urgent, focusing capital for effective investment projects in the field of production and main business and not investing in projects that were not really urgent was also an important solution that should be calculated”.

Recently the Ministry of Industry and Trade submitted a report to the Prime Minister on solutions (finance, investment, market and business) to remove difficulties for the oil and gas industry.