Korean refiners to lose edge in Vietnam gasoline market

Vietnam, a typical destination for South Korean gasoline, could look towards Southeast Asia as a gasoline supply source in 2021 as Vietnam adjusts its import tax structure, said market participants.

Vietnam is expected to reduce import taxes for gasoline cargoes from southeast Asia and South Korea to the same level in 2021. The Form D and Form KV certificates that prove the gasoline cargo originated from southeast Asia and South Korea respectively, will be subjected to a preferential import tax of 8pc in 2021, according to Asian refiners. Non-Form D or Form KV cargoes will have to pay an import tax of 20pc.

This will mostly impact the gasoline market as Form D and Form KV cargoes had not been subjected to import taxes for jet fuel, gasoil, fuel oil and kerosine. Vietnam imported 32,500 b/d of gasoline in during January-October, according to Vietnam's customs data.

This comes at a time of increasing refining capacity in southeast Asian after the start of 175,000 b/d refinery in Brunei owned by private-sector firm Hengyi and Malaysia's Pengerang Refining and Petrochemicals' 300,000 b/d refinery, a 50:50 joint venture between Malaysia's Petronas and Saudi Aramco.

Only cargoes with Form D certification with bill-of-lading date from 1 January 2021 will be subjected to the lower tax rate but environmental protection fees are expected to increase, said refiners.

Form KV cargoes have been taxed significantly lower than Form D cargoes and the change in import tax will impact trade flows. Vietnam accounted for 13.8pc of Korean gasoline exports at 26,500 b/d in January-October compared to just 1pc of Singapore's gasoline exports at 5,500 b/d, according to GTT customs data.

Vietnamese importers such as Petrolimex have been paying a premium above market for fob South Korean gasoline because of the preferential import tax but that premium will be eroded when the new import tax rate sets in.

South Korean refiners are already seeking new export destinations such as Australia, which recently announced plans to close some refineries and to review closures. BP announced last month that its 146,000 b/d Kwinana refinery in Western Australia would close next year and convert into an import terminal. Australian Viva Energy, the owner of 128,000 b/d Geelong refinery in Victoria and Ampol's 109,000 b/d Lytton refinery are also considering the long-term viability of their respective plants.

South Korea is an exporter of non-oxy gasoline, while Australia imports mainly non-oxy gasoline. South Korea exported about 22,000 b/d of gasoline to Australia during January-October.

By Aldric Chew