State-run energy firm PetroVietnam has asked for tax incentives for the country’s sole operating oil refinery Dung Quat, arguing that the latter’s products cannot compete with cheaper imports.
Tariffs on diesel and jet fuel A-1 imports have been cut by a half to 10% since the start of this year under a regional agreement, while the tax on crude oil remains at 20%. Dung Quat still relies on imported crude to produce its main products.
In addition, oil products imported from South Korea have been taxed at 10% after a free trade agreement between the two countries took effect late last year.
Meanwhile, the $3-billion refinery’s local clients have been downsizing their orders. Its biggest customer, the Vietnam National Petroleum Group orders 80,000 cubic meters of diesel a month, instead of 120,000 cubic meters like before.
“If diesel cannot be sold, Dung Quat refinery will be forced to scale down its capacity or halt production in the time to come,” PetroVietnam said in a document sent to government agencies.
Nguyen Hoai Giang, chairman of Binh Son Refining and Petrochemical Company Ltd. (BSR), the operator of the refinery, told BizLIVE that diesel imports from Southeast Asian countries, Japan and South Korea can be slashed to zero, versus the 10% tariff imposes on the refinery’s products.
“Tax should be reduced for zero, because if the 10% tariff persists, our products will be more expensive and distributors would not buy products of Dung Quat refinery,” Mr. Giang added.
PetroVietnam last year made a similar plea and threatened to shut down the refinery. The Ministry of Finance then reduced tariffs to 20% from 35% for Dung Quat.
Despite the headwinds, BSR made a profit of nearly six trillion dong (roughly $267 million) on revenue of 95 trillion dong ($4.22 billion) last year.