Vietnam has two oil refineries, Dung Quat and Nghi Son. Every year Vietnam imports millions of tons of crude oil while still exporting crude oil. What is the reason?
Data from the General Department of Customs shows that in 2021, Vietnam exported more than 3.1 million tons of crude oil, earning over US$1.76 billion. However, the country also imported more than 9.9 million tons of crude oil with an import value of over $5.15 billion. Thus, Vietnam’s spending on imported crude oil was much higher than its export revenue from this product.
Imported crude oil mainly serves the two refineries of Nghi Son and Dung Quat.
Why does Vietnam both export and import crude oil?
According to experts, this is related to the type of crude oil.
There are many different types of crude oil, with different properties. Some types of crude oils are used to produce gasoline, some others are used to produce D0. Some can be used to make lubricants while others cannot produce lubricants. There are types that can produce asphalt, but others cannot. In addition, there are crude oils containing many impurities, and there are crude oils with few impurities.
Oil refineries are designed to process certain types of crude oil.
The types of crude oil produced by Vietnam are not suitable for Dung Quat oil refinery, so it is exported to earn foreign currencies to import the suitable crude oil. The Dung Quat petrochemical refinery was originally designed to consume crude oil extracted from the Bach Ho field. However, in recent years, crude oil output from Bach Ho field has been decreasing while other fields have crude oil different from the technology designed for Dung Quat oil refining.
Vietnam has to export those crude oils to import the types that are suitable for the design of this plant.
To use other types of crude oil, refineries will have to invest in new technology and workshops.
In 2019, Dung Quat Oil Refinery used two new types of crude – WTI Midland oil (USA) and Bonny Light oil (Nigeria). The successful processing of WTI crude oil opens up opportunities for Vietnam to diversify its sources of imported crude oil, in the context of a decline in output of Bach Ho field.
From July 13 to 18, 2020, Dung Quat Oil Refinery conducted trial processing of Sokol oil. Experimental processing results show that it is possible to gradually replace Bach Ho crude oil in the near future, which has declined in output and quality.
Another reason is that for crude oil lots exploited by Vietnam, Dung Quat Oil Refinery has to participate in bids to buy it. Because many oil fields exploited by PetroVietnam have foreign partners, Dung Quat oil refinery, a joint-stock company, has to participate in oil bids.
If Dung Quat oil refinery pays a lower price than other participating firms in the bidding, it will not be able to buy crude oil from Bach Ho field, so it has to be imported from other sources. In particular, there are times when buying crude oil from other sources is cheaper than locally exploited crude oil.
Thus, the fact that Vietnam both exports and imports crude oil is a technical and economic factor for smooth and efficient operation of oil refineries.