PetroVietnam’s qualms over Nghi Son complex

18:48 | 07/10/2015
State-owned oil and gas conglomerate PetroVietnam is greatly concerned that the upcoming commissioning of the multi-billion-dollar Nghi Son oil refinery complex would dent a substantial hole on their finances. 

illustration photto - source VNA

The concerns arose as the Vietnamese government’s guarantorship over Nghi Son complex commits  PetroVietnam to consume NSRP products for a period of 10 years after the complex starts commercial operation. 

As scheduled, NSRP will become operational in 2017and reach its maximum annual capacity of 9.62 million cubic metres of petroleum products by 2018.  

Taken into account the annual capacity of more than 7.8 million cubic metres of Dung Quat oil refinery and 0.69 million cubic metres of four other units currently processing petrol from condensate, domestic petrol supply sources will be in a strong position to meet local demands, according to PetroVietnam estimates. 

Also, by 2018, the demand for petroleum products on the domestic market will be about a mere 17.3 million cubic metres, posting a particularly large excess of more than 0.8 million cubic metres of diesel oil. 

PetroVietnam worries that by that time petroleum trading firms will turn their backs on Vietnamese(-made) petroleum items because selling prices offered by local oil refineries coupled with the import tariffs as prescribed by Circular 78/2015/TT-BTC will result in higher costs than other ASEAN imports which enjoy import tariffs 5-20 per cent lower. 

Moreover, even in case locally-made petroleum products could not be sold, PetroVietnam still has to carry out its obligation of buying NSRP products, according to the signed agreements. 

PetroVietnam estimates that, according to the government’s implementation roadmap with NSRP, in case crude oil fetches $75/barrel, with current import duties they would need to pay NSRP about VND65 trillion ($2.98 billion) for petroleum items and VND10 trillion ($458 million) for petro-chemical items. 

The payment is to fill the difference between actual import duties and the preferential value level calculated for sale price NSRP enjoys (3 per cent for petrochemical products, and 7 per cent for petrol and oil). 

However, relevant guiding documents about the mechanisms related to the financing and associated procedures that enable PetroVietnam to pay the NSRP tax incentives on behalf of the government still remain unclear. 

To avoid its finances being affected upon NSRP commences commercial operation and to assure its paying ability towards NSRP, PetroVietnam has proposed that the government allow it to retain the sum derived when actual import tariffs fetch higher than NSRP’s above-stated preferential value levels. 

According to the government’s guarantee commitment, during the initial 10 years of NSRP’s commercial operation, if the actual import duties of petroleum products are set lower than NSRP’s preferential value levels calculated for sale price, PetroVietnam will pay NSRP the sum to fill the difference between the actual import duties and NSRP’s preferential value levels  when NSRP sells its products in the domestic market, whether through PetroVietnam or other firms.

By By Thanh Huong

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