Vietnam’s fuel deficit to persist despite new refinery

Created 10 August 2018
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The imminent start of production at the Nghi Son refinery is set to improve the country's self-sufficiency in refined fuels but a fuel deficit will still remain.

Vietnams Refining Capacity & Refined Fuels Consumptions.

 

Vietnam’s second standalone oil refining and petrochemical complex will be operated by a joint venture between Kuwait Petroleum Corporation and its partners, Fitch Solutions Macro Research said in a freshly-released outlook for Vietnam’s fuel processing sector.

Commercial operations are scheduled to begin in November after performance tests are completed. 

The $6 billion project in the central province of Thanh Hoa will have a processing capacity of 200,000 barrels per day of crude, mostly from Kuwait, to produce gasoline, diesel, jet fuel, and liquefied petroleum gas (LPG). 

Petrochemicals production is slated to start next year when Nghi Son’s polypropylene, naphtha and aromatics units come on stream.

The output from Nghi Son will primarily serve the domestic market, which continues to suffer a shortage of refined fuels and depends on imports. 

The production of diesel and gasoline - the two most widely consumed fuels in Vietnam - would contribute more than half of the plant’s capacity, with 38 percent of diesel and 14 percent of gasoline.

However, the output from Nghi Son will not be sufficient to stop imports, only reduce it. 

Nghi Son and the existing Dung Quat Refinery will struggle to keep pace with the rising demand, which is forecast to grow annually by 5 percent on average from now through 2027, outperforming the average of 3 percent in emerging Asia.

Vietnams Refining Capacity & Refined Fuels Consumptions.

Vietnam's Refining Capacity & Refined Fuels Consumptions.

This means Vietnam will suffer an annual fuel deficit of an estimated 220,000 barrels per day. Rapid economic growth, expanding transport fleets, and stable growth across the aviation, construction and tourism sectors continue to drive dependence on imports.

Reduced fuel flows into Vietnam will likely be offset by demand growth across Asian emerging markets, though risks exist due to higher oil and potential spillover from rising global trade tensions.

Singapore, South Korea and Malaysia will be among the most impacted due to their status as Vietnam's biggest fuel suppliers at a time when high crude prices and surging exports from China are crimping margins and pressuring prices.

 

Source: VNE

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