Vietnam's first oil refinery is facing the problem of having huge stockpiles of products that it has no place to store.
The Dung Quat oil refinery has 750,000 tons of oil and gasoline products in stock and not enough space to store them, said Vu Quang Nam, deputy chief executive of state-owned oil and gas group
PetroVietnam. He told a Monday conference in Hanoi that the plant has been running at full capacity, or 30 percent higher than the plan for this year.
According to Petrolimex, a subsidiary of PetroVietnam that has more than a 50 percent share of the domestic fuel market, the refinery was not able to project its output accurately at the beginning of this year.
Petrolimex therefore had to sign contracts to import 70 percent of the fuel it needed and only planned to buy the remaining 30 percent from Dung Quat. These import contracts could not be canceled, the company said.
Deputy Minister of Industry and Trade Nguyen Cam Tu said fuel traders had placed import orders early this year to ensure sufficient supply for the market. But the refinery's output was higher than expected, leaving the ministry with a difficult logistical problem on its hands, he added.
The ministry has ordered PetroVietnam and Petrolimex to work together and balance demand with domestic production and imports.
The Dung Quat refinery, which cost US$3 billion to build, is designed to supply about one-third of the country's fuel demand this year. The government in August approved a plan to increase its annual capacity from 6.5 to 10 million tons.
Vietnam spent $4.9 billion on petroleum product imports in the first nine months, a 4 percent rise, while earning $3.7 billion from the sale of crude oil, down 22 percent year-on-year, according to the General Statistics Office.
Nguyen Hoai Giang, general director of PetroVietnam subsidiary Binh Son Petrochemical Refinery Co., the operator of the 140,000-bpd refinery, said Dung Quat has supplied 5.5 million tons of fuel products to the market since it began commercial production in February last year.
Giang admitted that the plant was having a problem with slow sales right now. However, it will continue purchasing crude oil and maintain its production schedule, he said.
In the long term local fuel traders should build more storage facilities with a total capacity of 800,000 to one million tons, then "there will be no problem," he said.
Vietnam plans to build two more refineries, aiming at self-sufficiency in oil products by 2015. Previously, the country had to import all of its fuel products.