State-run Vietnam Oil and Gas Group (PVN) has proposed to temporary halt oil imports as global oil prices have crashed recently.

Dung Quat Oil Refinery plant.

However, Nguyen Viet Son, head of the General Department of Energy under the Ministry of Industry and Trade (MoIT), said measures should be in compliance with current regulations and international agreements that Vietnam is a part of.

As of present, output of Vietnam’s two oil refinery plants, Nghi Son in Thanh Hoa province and Dung Quat in Quang Ngai province, are capable of meeting 80% of domestic demand. However, as the Covid-19 pandemic is weakening demand, Son expected energy firms to streamline operating costs and adjust production capacity.

Son said the WTI oil prices falling to below zero is actually the transaction price between traders on the stock market, not the price between oil producers and oil refinery plants as the end user, not to mention the tiny volume volume of oil changed hands at prices below zero.

In the coming time, the MoIT would continue to provide supporting measures for the energy industry in forms of taxes and fees reduction, Son stated, while encouraging oil and fuel distributors to prioritize over domestic products instead of imported ones.

According to the PVN, a sharp decline in oil prices would severely affect the group’s revenue targets.

In case the average oil price in 2020 hits US$30 per barrel, PVN’s revenue is set to decline by 19% compared to the year’s target, to VND520 trillion (US$22 billion), resulting in a 38.4% decrease against the year’s plan in contribution to the state budget at VND50.6 trillion (US$2.14 billion).

PVN estimated each US$1 reduction in oil prices would cause the state firm to lose VND4.6 trillion (US$194.73 million) in revenue and subsequently VND1 trillion (US$42.33 million) reduction in state budget contribution.