How is Vietnam exploiting and consuming petroleum?

Crude oil exploitation is decreasing day by day

In 2021, Vietnam will exploit nearly 11 million tons of crude oil, of which 9.1 million tons will come from domestic fields, and nearly 1.9 million tons will be extracted from foreign fields that PVN cooperates with and invests in. In the past 6 years, domestic production has been continuously decreasing. On average, production has decreased by one million tons per year.

The decrease was mainly due to a sharp decrease in domestic exploitation. Crude oil extraction is more and more difficult than before because the increase in reserves (finding, exploration and extraction of oil and gas in new tanks/fields to compensate for annual production) has decreased significantly. For example, if converted into oil, the increase in reserves reached 40.5 million tons in 2015, then three years later it will be 12 million and in 2021 it will be 4.6 million tons.

In addition, according to data from the Ministry of Industry and Trade, new oil and gas discoveries are also showing signs of decreasing. If in the period 2011-2015, there were 24 new oil and gas discoveries, then 5 years later there were only 7 new oil and gas discoveries, at the fields of Ken Bau, Soi Vang, Meo Trang Dong…

Newly signed oil and gas contracts or the investment of resources for search and exploration also decreased compared to the previous period. According to the Ministry of Industry and Trade, only 3 new contracts were signed in 2016-2020, down 7 times compared to the previous 5 years.

At the main oil and gas fields (Bach Ho, Su Tu Den, Su Tu Vang…), the exploitation is in the stage of production reduction or high water level, potentially risky. The recently discovered mines are small in scale, located in complex geological and geographical areas, in difficult-to-access deep-water areas, and require large investments and high risks.

Why does Vietnam export crude oil and then import it?

Crude oil exploited domestically is mainly supplied in the domestic market for Dung Quat oil refinery, which has a design capacity of 6.5 million tons per year. About a third of the remaining oil is sold.

Last year, Vietnam exported 3.1 million tons of crude oil, but also imported 9.9 million tons for refining. With imported crude oil output, it is mainly used for two oil refineries, Nghi Son and Dung Quat, in which Nghi Son factory uses 100% of imported crude oil.

This also explains why since 2018, when this plant was in commercial operation, Vietnam’s annual crude oil imports more than doubled.

The reason why Vietnam is a crude oil producer and exporter, but still has to import crude oil for refining, according to experts, is mainly to optimize the technology, economy and operational efficiency of refineries. oil.

In fact, crude oil has many different types and characteristics, such as sweet oil, light oil, heavy oil… Each type of oil will produce finished products such as gasoline, diesel, kerosene, and fuel oil. .. and other petrochemical products.

Each refinery is technologically designed to use different types of crude oil. For example, Nghi Son Refinery uses 100% crude oil imported from the Gulf, oil extracted in the desert, and shale.

Dung Quat Oil Refinery is designed to consume crude oil extracted from Bach Ho field. However, in the past few years, the amount of oil extracted from this field has been decreasing, while the amount of oil extracted from other fields is not optimized with the technology of the plant, so they have to import more suitable crude oil to about filtering. This factory also tested the blending of crude oil imported from abroad with low price (mixing ratio of 20%) still producing good products, ensuring business efficiency.

In addition, this import is in many cases advantageous in terms of price compared to buying crude oil from domestic sources. The increase in the percentage of imported oil that goes into processing helps this plant diversify its production material sources in the context of decreasing output of crude oil from Bach Ho field and other domestic oil.

Crude oil extracted from Vietnam, especially from Bach Ho field, is a sweet oil with low sulfur content (usually <0.5%), so it can be sold at a higher price than oil from the Middle East. .

In general, the export of crude oil brings economic efficiency and a great source of revenue for the State budget.

In the first four months of this year, PVN exploited more than 3.6 million tons of crude oil. Thanks to the increase in crude oil prices on the world market, the budget revenue from crude oil sales in April reached VND 6,600 billion. Accumulated in the first 4 months of the year, this amount reached VND 24,100 billion, nearly doubled over the same period and equal to 85% of the year estimate.

“In the market mechanism, if you can sell crude oil at a high price and buy it back at a good price, you will both contribute revenue to the budget and optimize your business. If you can, you have to sell it, you can’t store it… It’s normal to exploit, then export, and import crude oil for processing, “said an expert.

Where does domestic consumption of petroleum come from?

Vietnam currently has two oil refineries, Dung Quat and Nghi Son, supplying 10-13 million m3 each year, tons of gasoline and finished oil of all kinds. These two factories currently supply about 70% of the domestic demand for gasoline and oil, of which the supply proportion of Nghi Son is about 35%, sometimes up to 40%.

In addition, there are a number of condensate plants such as PVOil Phu My, Dong Phuong, Saigon Petro… with a production capacity of over 600,000 m3, tons a year.

With the country’s annual consumption demand of 20.5-21 million m3, tons, the supply from domestic production meets 70% of the national consumption demand, so the remaining 30% of demand still has to import finished petroleum products. from countries.

The main import markets of Vietnam’s finished petroleum products are Southeast Asia (Singapore, Malaysia, Thailand…), Korea, and China. These are markets where Vietnam can take advantage of import tax incentives from signed free trade agreements.

On average, over the past 6 years (2016-2020), each year, Vietnam imported 11.5 million m3, tons of finished petroleum products of all kinds. Import trends will decrease significantly in 2021, with 6.9 million m3, tons as supply from domestic refineries increases significantly.

However, at the beginning of 2022, Nghi Son Refinery cut capacity because of financial difficulties, causing imported petroleum output to increase due to having to compensate for the short supply from this plant. It is expected that this year the amount of imported petroleum products will be about 7.4 million m3, an increase of about 1 million tons compared to the previous plan.

While importing one-third of the total national consumption demand, Vietnam also exports an average of more than 2 million tons of petroleum products, which are mainly petrochemical products, to other countries. The largest import market of these products from Vietnam is Cambodia, accounting for nearly 30% of total exports. Next is Singapore 20%, China more than 10%…

Where is the price of gasoline in Vietnam compared to the world?