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From Dung Quat to Nhon Hoi

According to Professor Nguyen Mai, chair of the Vietnam Association of Foreign Invested Enterprises (VAFIEs), the total designed capacity of the licensed oil refineries projects has reached 65 million tons per annum. 

This means that the crude oil volume the refineries need to run is far higher than the total domestically exploited output, about 15 million tons per annum.

In order to ‘feed’ all the oil refineries, Vietnam would have to import 45-50 million tons of crude oil and heavily depend on world price fluctuations. 

Mai went on to say that other countries that are years ahead of Vietnam in developing the petrochemistry industry have suffered from industrial development.

“Environmental pollution, greenhouse gas emissions and the need for a large land fund all are the prices they have had to pay for their petrochemistry industry. I think Vietnam should control the industrial development at a reasonable level,” Mai said.

Regarding the ‘heavy price’ Vietnam has to pay in exchange for the oil refinery development, an analyst noted that trillions of dong have been lost, though only one refinery – Dung Quat – is operational.

What has Dung Quat gained? Vietnam has mastered oil refinery technology. It has also successfully trained workers in the field. 

However, according to Dr Nguyen Tu Anh, a renowned analyst, Vietnam has paid heavily for the gains, including direct costs and opportunity costs.

The direct costs are understood as the amount of money the government fails to collect because of tax incentives it offers to the investor. 

Meanwhile, opportunity costs means the other investment opportunities lost as $3.5 billion has been tapped into Dung Quat instead of other projects, such as infrastructure development projects. 

According to PetroVietnam, the total tax incentives Dung Quat received in 2010-2014 was VND26.55 trillion. In 2014, Binh Son, the company that runs Dung Quat, received no less than VND2.9 trillion for petrol and diesel alone.

If the same preferences were given to Binh Son in upcoming years, the figure would be no less than $2 billion in 2010-2018 or VND43.6 trillion.

“If the preferences are extended to 2027, the figure would be much higher. And if Dung Quat cannot compete without preferences, the total cost for Vietnam to have its own oil refinery industry will be gigantic,” Anh said.

It is highly possible that the government would have to protect Dung Quat for a long time, because Dung Quat still cannot compete well with foreign projects after seven years of operation. 

TBKTSG