Lack of storage space stymies Vietnam efforts to buy cheap oil

By Anh Minh   April 23, 2020 | 08:17 pm PT
Lack of storage space stymies Vietnam efforts to buy cheap oil
An employee at an oil storage space of PV Oil, a subsidiary of Petrovietnam. Photo by Hai Xuan.
Large unsold inventories and a resultant lack of storage space is preventing Vietnamese companies from profiting by buying oil on the cheap.

Petrovietnam said in a recent statement that since Vietnam does not have a crude oil national storage, the company’s crude oil is stored in its two refineries at Dung Quat and Nghi Son, which together meet 80 percent of domestic demand.

Although oil dropped to unprecedented negative prices this week, the state giant said despite considering the possibility of buying and stockpiling crude, it cannot. Hiring tankers for storing crude oil is not feasible given its budget constraints, it added.

A senior executive at a fuel distribution company in the south, who asked not to be identified, said though stockpiling has been a successful strategy in the past, the situation with Covid-19 has been different since the company’s revenues have been severely dented and inventories have piled up.

"Even if we bought more oil, we do not know where to store it."

Nguyen Quang Dung, deputy director of another fuel distributor, Petrolimex, also said most storage space has been taken. But he declined to say whether or not the company plans to buy oil.

Some experts called for stockpiling. Tran Viet Ngai, chairman of the Vietnam Energy Association, said that the lack of storage space should not be an excuse to not import oil.

Power plants consume 2.5-3 million tonnes of oil a year and they have storage tanks, and Vietnam should take this opportunity to buy oil when prices are low, he said.

Vietnamese fuel companies have reported multimillion-dollar losses due to the dwindling demand for travel caused by the pandemic.

Petrovietnam could lose revenues of up to VND141 trillion ($6 billion) this year as prices fall, according to a recent report.

Authorities in the central province of Quang Ngai, where Dung Quat is located, have urged the government to ban oil imports to liquidate the refinery’s large inventory.

The Ministry of Industry and Trade has not commented on this demand, but has called on distributors to prioritize consumption of domestic oil instead of importing.

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