Quang Ngai proposes solutions to Dung Quat refinery difficulties

VietNamNet Bridge – The government of Quang Ngai Province has written to the Government and ministries proposing not applying a regulatory charge of 7% to Dung Quat Oil Refinery and approving the refinery expansion project, according to Tuoi Tre newspaper.

From next year, the fuel market will face difficulties in supply and demand plus the Government’s new strict regulations which may reduce profit of Binh Son Refining and Petrochemical Company (BSR), the operator of Dung Quat Oil Refinery.

If the Government agrees with the Ministry of Finance’s proposal concerning a regulatory fee applied from 2018 to 2020, BSR’s revenue would annually decrease by VND0.7-3.8 trillion (US$30.83-167.34 million) and its products would become uncompetitive on the local market. Currently, the regulatory charge of 7% is slapped on the country’s first oil refinery to balance import tariffs on fuels and the tax on crude oil imported by the refinery.

Quang Ngai authorities said Dung Quat will be at a disadvantage over Nghi Son Oil Refinery, the latter being entitled to a tax of 7% for gasoline, 5% for liquefied petroleum gas (LPG) and 3% for petromechical products for 10 years.

The fee will also affect the equitization of BSR as investors may be no longer interested in BSR shares given its less appeal in terms of financial viability.

Regarding the upgrade and expansion of Dung Quat Oil Refinery which is considered crucial so that its products can meet exhaust emissions standards applied in the local market in 2022, it would be harder to mobilize capital to implement the project, said Quang Ngai authorities.

In addition, State ownership at BSR will fall to below 50% after the firm’s equitization, so the Government cannot provide guarantees for BSR’s loans while large banks such as Vietcombank, BIDV and VietinBank will only offer loans guaranteed by the Government.

BSR, an arm of Vietnam Oil and Gas Group, annually contributes over VND22.6 trillion or more than 90% of Quang Ngai’s total budget revenue.

Source: SGT