Vietnam warns of refinery closures amid demand slump

State-owned PetroVietnam warned domestic refineries are at risk of shutting down amid swelling inventories, the collapse in oil prices and an unprecedented drop in transportation fuel demand amid measures to curb the Covid-19 outbreak.

Vietnam has two domestic refineries, the 145,000 b/d Dung Quat and the newer 200,000 b/d Nghi Son. Both are supposed to supply around 70-80pc of domestic fuel consumption but a sharp fall in transportation fuel demand and lack of available space in oil storage tanks are threatening their operations.

Buyers of oil products from the two domestic refineries have been cancelling and deferring cargoes because of falling domestic demand, causing inventories to swell to a high level, said PetroVietnam.

The problem is exacerbated by continued imports and authorities needing to implement policies to minimise product imports, PetroVietnam said. The country has continued to import 1.3mn t of products during January-February despite falling demand. Dung Quat and Nghi Son produced about 2.16mn t of oil products during the same period.

Vietnam, which started a nationwide social distancing exercise for 15 days from 1 April, has seen the lockdown measures severely cut demand for transportation fuels. Gasoline demand in this year's first quarter is estimated to have fallen by 30pc, according to PetroVietnam's calculations, warning of more cuts if the situation fails to improve.

Vietnam is a net product importer, having already reduced its imports in first-half March, according to preliminary custom reports. It imported 28,398t (240,000 bl) of gasoline, 109,565t (817,000 bl) of gasoil and 76,099t (600,000 bl) of jet fuel, which were 82pc, 22pc and 8pc lower respectively than imports for the same month in 2019. Most of its imports come from South Korea, Singapore and China.

By Aldric Chew