The oil products refined by Vietnam’s first Dung Quat oil refinery may be more expensive, or at least not cheaper, than imported items, affirmed Nguyen Duc Kien Chairman of the National Assembly’s Committee for Economics and Budget.
The high depreciation of the refinery complex is the core reason for the higher price of Vietnam’s future refined oil products if it is based on the current depreciation calculation mechanism, Kien added.
In the initial period, the refinery will not operate at full capacity while the depreciation still exists, causing higher prices of finished oil products, he explained.
“I think the government should apply a flexible depreciation regulation,” he said. “However, to date, the government has not drawn up a roadmap for this issue yet.”
“In my opinion, the depreciation level must be raised gradually when the refinery is in the first phase of operation.”
Dung Quat oil refinery, which can process 6.5 million tons of crude oil a year, or 130,000 barrels a day, is slated for operation in early 2009. The facility is estimated to meet 40 per cent of the domestic demand then.
Under the Vietnamese rule, the Vietnamese government fixes prices of petroleum sold in the domestic market.
Losses from oil sales, but not petrol, by oil traders will be compensated by the State coffers.
Currently, without oil refinery, Vietnam is totally reliant on imported oil. It spent $3.66 billion on import of 6.82 million tons of refined oil in the first seven months of this year, up 29 per cent in value but down 2.9 per cent in volume.
However, the fuel import spending is made by its earnings from crude oil export.
Vietnam earns roughly $5 billion from crude export in the first seven months.
Saigon Economic Times
Vietnamese
