Gazprom Neft, the oil arm of top global gas producer Gazprom, has pulled out of negotiations for buying a stake in Vietnam’s sole oil refinery at Dung Quat.
A spokesperson for fuel giant PetroVietnam said the Russian state firm called off plans to buy 49 percent after the Vietnamese government turned down its request for support for operating and expanding the refinery.
The Ministry of Industry and Trade has refused to continue with “favorable” import tariffs for the refinery after 2018, the source said, without spelling out specifics.
Dung Quat refinery in the central province of Quang Ngai began operating in 2008 with a capacity of 6.5 million tons a year.
The refinery, which posted a record profit of VND5.8 trillion (US$258 million) last year, has been enjoying various benefits such as reduced import tariffs and low corporate tax.
Binh Son Refining and Petrochemical Company, which operates the plant, last year also asked the government to cut its diesel import tariffs by 3 percentage points to 7 percent to help it compete with imports from Southeast Asia and clear its “excessive inventory.”
But the finance ministry rejected the request.
PetroVietnam said since Dung Quat sought to be privatized, Gazprom Neft has said it would continue to look for opportunities to buy a stake.
Energy cooperation has long been a part of Vietnam-Russia ties starting with the construction of hydro power plants in Vietnam in the 1980s and later the oil and gas joint venture Vietsovpetro and construction of a nuclear reactor in central Vietnam.