Bio-Ethanol Dung Quat, a bio-fuel factory owned by the Viet Nam Oil and Gas Group (PetroVietnam), has halted operations due to continuing losses.

Deserted facilities inside the Bio-Ethanol Dung Quat factory, which has halted operations for nearly a year. — Photo baoquangngai.vn

The VND1.9 trillion (US$84.4 million) factory began operations in February 2012, after the PetroVietnam Central Bio-Fuels JSC (BSR-BF) began construction of the facility in central Quang Ngai Province's Dung Quat Economic Zone in September 2009.

The factory was expected to produce 100 million litres of ethanol per year, to be mixed with A92 gasoline to generate bio-fuel E5.

In early 2013, PetroVietnam assigned its Binh Sơn Refining and Petrochemical Company Limited (BSR) to run the factory, in a bid to increase its overall business management.

Director of the plant Pham Van Vuong told Người lao động (The Labourers) online recently that the facility ceased operations nearly one year ago, after maintaining modest activities for a considerable time.

Vuong explained that fewer than ten out of 63 provinces and cities nationwide uses E5 gasoline, consuming a combined quantity of 2,000 cubic metres of ethanol per month, on average. This volume represented only about one quarter of the factory's monthly production capacity.

In addition, the cost of ethanol rolled out at the factory was higher than ethanol prices in the market, which averaged less than VND2,000 per litre.

"We have sought ways to export ethanol, yet failed to compete, as well," he said.

Báo Quảng Ngãi, the newspaper of the provincial party committee, reported last September that the factory suffered losses amounting to billions of đong, since it was unable to compete.

Vượng said the pause in operations was a temporary measure for the factory to cope with its difficulties, as it was awaiting better market conditions.

He added that 128 of the more than 200 engineers and workers at the factory have temporarily been let go and no longer receive salaries, as of this month, while some were shifted to other jobs at the Dung Quat Oil Refinery, another plant operated by PetroVietnam in the province.

Additionally, many employees had searched for seasonal work to earn their livings, a worker told Người lao động.

Further, the Quang Ngai Department of Taxation reportedly said on Monday that BSR-BF had asked for permission to postpone its responsibility to pay value-added taxes in 2016.

An official with BSR-BF told VnExpress online, based upon remaining anonymous, that the company would address issues related to Bio-Ethanol Dung Quat at an upcoming shareholders' meeting.

Meanwhile, Quang Ngai People's Committee requested prompt reports from both BSR-BF and BSR about the situation at the factory and their suggestions about taxes, loans and restructuring schemes.

"Based on that, provincial authorities will ask for the Prime Minister's resolutions," said the vice chairman of the committee, Pham Nhu So.

Bio-Ethanol Dung Quat was established as part of a national scheme to develop biological fuel, with vision through 2025.

The scheme aimed at the partial substitution of biological fuel for fossil fuels, helping the country to ensure its energy security and protect the environment. E5 gasoline was expected to be used for motor vehicles nationwide as from December 2015.

However, the anonymous official from BSR-BF said E5 gasoline remained unattractive to consumers and was unable to compete with traditional gasoline.

This occurred, especially in a context that global oil prices had sharply declined, with domestic price of E5 gasoline staying at VND13,890 per litre, only about VND1,200 lower than the price of A92 gasoline, he said. 

VNS