SINGAPORE/HANOI: Vietnam’s Nghi Son oil refinery is seeking approval to export oil products as high inventories and pre-existing import contracts have limited domestic fuel demand, said three industry sources on Monday.
If the approval is granted, this would be the first time Vietnam, a net importer of fuel, has allowed oil product exports produced domestically. The fuel shipments could also weigh on regional margins at a time when supplies are expected to start flowing from new projects in Malaysia and China.
Nghi Son Refinery and Petrochemical LLC, owner of the 200,000 barrels-per-day (bpd) refinery, has ramped up output to more than 50% of capacity since starting up earlier this year and this has contributed to high fuel inventories, the sources said.
“We are seeking the approval from the Ministry of Industry and Trade to export our fuel products,” one of the sources told Reuters, declining to be named as he was not authorised to speak with media.
“We have been selling part of our fuel output to the local market, but local traders and consumers are unable to absorb all of our products because they have already placed long-term orders with international suppliers, pending our official commercial production,” the source said.
The Ministry of Industry and Trade did not immediately comment on the export request.
Vietnam’s imports of oil products in July fell to its lowest since January 2016, shipping data from Thomson Reuters Eikon showed.
Fuel inventories are high amid weak domestic sales and higher refining output, a Vietnam-based industry source said.
“Vietnam has a surplus of diesel and gasoline and sales are especially bad for gasoline with cargoes selling at a heavy discount,” the source added.
Nghi Son, the country’s second refinery, is scheduled to reach full capacity by the fourth quarter of this year, the first source said.
The refinery sold its first cargoes of gasoline and diesel in May and exported its first petrochemical shipment in June.
Nghi Son and the 130,000-bpd Dung Quat refinery that started up production in 2009 are expected to jointly meet about 70% of the country’s refined oil product demand.
The plant is scheduled to import 6 million tonnes of crude oil and churn out 4 million tonnes of refined products this year, the company said in a statement late last month.
Nghi Son is located 260km (160 miles) south of Hanoi.
The US$9 billion refinery is 35.1% owned by Japan’s Idemitsu Kosan Co, 35.1% by Kuwait Petroleum, 25.1% by PetroVietnam and 4.7% by Mitsui Chemicals Inc.