PetroVietnam again threatens refinery shutdown in bid to get tax breaks

Thanh Nien News

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Dung Quat oil refinery. Photo credit: Binh Son company's website Dung Quat oil refinery. Photo credit: Binh Son company's website


State-owned Vietnam Oil and Gas Group, or PetroVietnam, has again lobbied for tax breaks for the country's sole oil refinery Dung Quat, saying its products cannot compete with cheap imports, local media reported on Monday.
In a letter sent to the government, PetroVietnam asked for lower tariffs on crude oil that the refinery's operator, Binh Son Refining and Petrochemical Company, has to import for production.
Lower input costs will allow the refinery to compete against ASEAN and South Korean producers, the letter said.
While Vietnam is a crude oil exporter with an output of 18.74 million tons last year, Dung Quat has been relying on imported crude for producing its main products, diesel and jet fuel A-1, since it went into operation in 2008.
Crude imports are taxed at 20 percent. Oil products have been imported tax-free from ASEAN countries since the beginning of this year under a regional agreement. There is a 10 percent tariff on South Korean products 
Although Binh Son has lowered prices, its products still do not have a competitive edge, PetroVietnam said in the letter.
Since the end of last year, the US$3-billion facility with an annual capacity of 6.5 million tons has been struggling to sell its products, as local distributors have been reducing their orders, it said.
Its biggest customer, the Vietnam National Petroleum Group, for instance, orders 80,000 cubic meters of diesel a month, instead of 120,000 cubic meters like before.
Buyers have agreed to sign short-term of two or three months only, apparently to wait for lower prices, the media reported.
Speaking with news website Infonet, Nguyen Hoai Giang, chairman of Binh Son company, said that without new orders, Dung Quat will likely be shut down in two or three months.
Last year PetroVietnam made similar pleas twice and managed to convince the Ministry of Finance to reduce tariffs to 20 percent from 35 percent for Dung Quat.
Binh Son posted a profit of nearly VND6 trillion ($265.36 million) last year, and has expanded the refinery in the central province of Quang Ngai since the middle of last year, at a cost of $1.82 billion, according to local media.

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