Vietnam: Stricter fuel standards cause headache to major oil refineries

Vietnam: Stricter fuel standards cause headache to major oil refineries

Stricter fuel standards cause headache to major oil refineries, vietnam
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Major fuel trading businesses were recently required to supply diesel oil
level 4 (Euro 4 standard) to the market no later than on January 1, 2018, a
move which put Vietnam's two existing refineries-Dung Quat and Nghi Son-into
a tight spot.

The two refineries need more time to upgrade their facilities to reach the
required standards.

Dung Quat, Vietnam's first oil refinery based in the central province of
Quang Ngai, had its initial investment project approved in 1997 and revised
plan approved in 2005.

At the time the technical blueprint was approved, the products made by Dung
Quat were ensured to meet or surpass contemporary quality requirements.

The first batch of products came out in February 2009 and the facility was
ready for commercial operation from May 2010, with products strictly meeting
Vietnamese quality standard requirements.

In September 2001, following the enactment of the prime ministerial Decision
49/2011/QD-TTg (Decision 49) which requires the supply of Euro 4 fuel
products to the market starting from January 2017, Dung Quat has set to
upgrading and expanding its production lines.

For a combination of factors, its targets for quality improvement and
capacity expansion have yet to be fully completed.

Dung Quat's upgrade and expansion project was scheduled for completion in
2022.

A recent report by domestic state-owned fuel giant and Dung Quat's
management authority PetroVietnam stated that even when the upgrade and
expansion was finalised, Dung Quat could only produce and supply petrol and
diesel oil meeting Euro 2 standards.

With the current production capacity of 2.48 million tonnes of petrol and
2.33 million tonnes of diesel oil per year, Dung Quat can satisfy only part
of the local fuel demand.

Nghi Son complex (NSRP), based in the north-central province of Thanh Hoa,
has run into similar difficulties.

NSRP's investment project was approved in April 2008 and its master
technical design was approved in December 2009.

The bidding process took place in March 2009. This means all important steps
for the project's deployment were implemented before the enactment of Decree
49.

According to the blueprint, the products made by NSRP will met or surpass
existing quality requirements. The oil refinery is to begin test-runs and
market its first batch of products within this year.

Once operational, NSRP will be producing 1.47 million tonnes of common
diesel oil and 2.2 million tonnes of top-grade diesel oil per year.

Both Dung Quat and Nghi Son oil refineries will have a large part of their
production falling short of Euro 4 standards, making it hard for these two
oil refineries to satisfy the recent requirements on Euro 4 standards.

Earlier, Notice 398/TB-VPCP dated December 2016 of the Government Office
stipulated that passenger cars and buses with diesel engines shall be
applied Euro 4 emission standards from January 1, 2018, while the deadline
for trucks with diesel engines will be extended to 2022.

Deputy Prime Minister Trinh Dinh Dung, however, via Document 436 TTg-CN
dated March 2017, asked the Ministry of Industry and Trade to require major
fuel trading businesses to work out a plan ensuring the supply and
distribution of Euro 4 and 5 fuel products in the market to meet the
requirements of Decision 49.

Right in this year's fourth quarter, these firms must improve infrastructure
conditions and other commercial factors to be able to supply Euro 4 diesel
oil to the market no later than January 1, 2018.

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Link to Original Article:
http://english.vietnamnet.vn/fms/business/177305/stricter-fuel-standards-cau
se-headache-to-major-oil-refineries.html

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com