Coal contract ignites friction between Vietnamese state-owned giants

PetroVietnam’s Vung Ang 1 power plant has cut the volume of coal it purchases from top domestic coal producer Vinacomin and opted for cheaper imports of the fuel.

The Vung Ang 1 power plant. Photo by PetroVietnam Construction Corp.

From January-April, Vung Ang 1 in the central province of Ha Tinh only bought 300,000 tons of coal from Vinacomin, much lower than the 1.3 million tons that it previously agreed in principle to buy, Nguyen Canh Nam, an official from the Vietnam Energy Association, said in a statement on the Vinacomin website earlier this week.

In January this year, Vinacomin inked a deal to supply around 2.6 million tons of coal to Vung Ang 1 in 2016. The General Department of Energy under the Ministry of Industry and Trade held a meeting with the two companies on April 14 to try to resolve the issue. After the meeting, Dang Huy Cuong, director of the department, issued a note asking the national oil and gas group to direct the Vung Ang 1 operator to continue buying coal from Vinacomin as agreed in the contract.

The situation comes at a time when many coal consumers in Vietnam are importing more of the fuel to take advantage of low global prices, especially from Australia and Indonesia. In the first four months of this year, the country imported 4.74 million tons of coal, jumping 262 percent from the same period in 2015.

Indonesia, one of Vietnam's top coal suppliers, set its April thermal coal reference price at $52.32/ton, 18.8 percent lower on-year, according to Platts, a global energy news outlet.

In the first four months, coal imports from Australia rose to 1.51 million tons, nearly 5 times higher than the same period last year, while shipments from Indonesia reached 802,416 tons, rising 37 percent on-year.