Raw Material Export Jumps: Bad or good news?

Crude oil and coal export maintains high growth in recent years and contributes a large percentage to the State incomes. The export volume even exceeded the preset targets, according to the Ministry of Trade. The excessive exploitation of these natural materials has caused fears over early exhaustion and Vietnam has to import coal for the domestic electricity industry as it is doing for the hardwood industry.

In the first four months of this year, Vietnam’s coal and crude oil export volume rose up to 47.9 per cent and 15.6 per cent, respectively. These commodities had the highest growth in the industrial goods group. However, according to experts from the Ministry of Planning and Investment, this growth is not an achievement but a worry for the energy source supply capacity for the future economy.

Coal export: The coal export increases continuously in recent years. Vietnam’s coal export jumped from only 6.5 million tonnes in 2003 to 10.5 million tonnes in 2004 and 17.8 million tonnes in 2005.

In the first four months of this year alone, the country exported 8.7 million tonnes. The biggest disappointment is that while the export volume increased, the price was down to US$32 a tonne, compared with US$37 in the same period last year.

The coal reserves of Vietnam are limited and exhaustion is possibly inevitable in the future. Early exhaustion may seriously affect the future electricity development strategy. In 2005, Vietnam exploited some 25 millions tonnes of coal, of which 18 million tonnes were exported for total revenues of US$658 million, even exceeding the targets set until 2010 by the government. Under the plan, Vietnam planned to export only four million tonnes of coal worth US$120-150 million a year between 2001 and 2010.

 

Crude oil export: Vietnam now has not completed the construction on its refineries. Hence, all exploited crude oil is for export. In 2005 alone, it exported some 18 million tonnes valued at nearly US$7.4 billion. Compared with the Export Strategy for the 2001-2010 period, the crude oil exploitation and export volumes increased 12.5 per cent.

Under the strategy, the exploited crude oil volume would stay within 14-16 million tonnes a year, a proportion of which will be used for domestic production. The reduction in crude oil export volume will be carried out in parallel with the cutback in petroleum product import volume. The underway refineries are estimated to fulfil nearly 80 per cent of domestic demand by 2010, or 13 million tonnes evaluated over US$3 billion.

Meanwhile, Vietnam has to import a large volume of petroleum products at prices which are several times higher than in countries importing crude oil from Vietnam. Vietnam imported eight million tonnes of petroleum products in 2000 and is forecast to import four million tonnes by 2010 when its three refineries will be operating. Hence, the earnings material and fuel export in 2005 and the 2001-2005 period still accounted for nearly 23 per cent of the country’s total export turnover. Vietnam failed to keep track of its strategy of reducing the turnover percentage of the crude material and fuel export to some 9 per cent. This is actually cause for alarm.

Unavoidable import of coal: At present, up to 60 per cent of coal is exploited from opencast mines. However, supplies from these mines are reducing. Hence, in the future, the coal exploitation will depend on sources from deep underground mines. Certainly, the productivity is lower than opencast exploitation and the output can hardly increase as fast as in recent years.
 

Previously, the domestic demand for coal was low and the export was aimed to expand consumption market for the coal mining industry and seek foreign currencies for the modernisation of the exploitation activities. But at present, the demand in the domestic market has soared high, with last year’s estimated consumption of 15 milliontonnes, a 1.7 fold increase compared with three years earlier.

The largest coal user is the electricity sector. Under the electricity industry development plan, Vietnam will build coal-powered thermoelectric plants with a combined capacity of 3,000 MW in the next five years and new plants with an output of 4,500-5,500 MW in the following five years. If the gas-fuelled and hydropower plants fail to meet the domestic demand, the industry will need additional coal-powered plants with a capacity of 8,000-10,000 in the 2010-2015 period.

The potential of coal is huge but its exploitation is not easy. According to statistics released by the Vietnam Coal and Mineral Group, the total coal reserves in Vietnam were over 220 billion tonnes. Of the sum, only 10.5 billion tonnes are exploitable and only 3.5 billion tonnes lies at a depth of less than 300 metres.

Mines in Quang Ninh Province were tapped up a century ago. With the current exploitation output of 32 million tonnes a year in addition with 15-20 per cent loss, the exhaustion of the easy-to-tap mines is bound to be soon. To avoid early exhaustion as used to happen to forest materials and to reduce future imports, the Government must consider the reduction and the halting of coal exportation.

 

Having to Cut Crude Oil Export: Under the development plan of the oil and gas industry, Vietnam will not only export crude oil but also import crude oil for the future refineries. The Ministry of Planning and Investment has proposed the Prime Minister to reduce export of several important materials and fuels, especially crude oil, in order to ensure supplies for the national industries and reduce excessive imports in the 2006-2010 period. Accordingly, the crude oil export volume will be cut to 18.5 million tonnes in 2006 and 15.6 million tonnes in 2010. The exported coal volume in 2006 must not exceed the amount in 2005, and from 2007 each year the export volume must be reduced by one million.

In addition, to reduce excessive imports, the top measure proposed by the Ministry of Planning and Investment is to increase export of potential materials but they have little impacts on the national natural resources. The suggested commodities are aquatic products, leather, footwear, garment and textile. Accordingly, the estimated garment and textile export value is US$10 billion, footwear US$6.5 million, aquatic products US$4.5 billion, electronics appliances US$3.2 million and woodworks US$3 billion.