작성일자: 2014.3.3

작성자: 하노이 무역관 Nguyen Quynh Chi(Nq.chi@kotra-hanoi.org.vn)

 

 

1. Vietnamese Petroleum market

 

□ Market Scale

 

 ○ Due to the impact of the economic crisis, consumption of gasoline continued to decrease in 2013 compared with the previous year. As the estimation of Industry Department of Ministry of Industry and Trade, the total consumption demand of petroleum (gasoline and oil) reached more than 18.8 million tons. However, supply of oil is still ensured, more diversified and less dependent on the import market.

 

 ○ Vietnam's refining production is set for a rise from the construction of two new build refineries – Nghi Son and Vung Ro. Its refining capacity could increase from 140,000b/d in 2012 to 345,000b/d by 2017, rising further still to 501,700b/d by the end of our forecast period when these refineries fully enter operation. There is significant upside risk to this forecast, if four other proposed projects are brought into fruition.

 

 ○ Dung Quat oil refinery works pretty stably, almost at 100% capacity, with production in 2011, 2012 and 2013 respectively to 5.45 million tons, 5.6 million tons and 5.65 million tons (as of 8/11), that can cover about 30% of the consumption needs of the country. A series of refinery also began construction (Nghi Son) or active preparation (Long Son and Nhon Hoi,).  Inventories of major enterprises are more than 1.5 million ton in 2013.

 

Production of oil and gas

                               Source: Ministry of Industry and Trade

 

Export volume

                                  Source: Ministry of Industry and Trade

 

 ○ Imports of petroleum into Vietnam fell sharply during last 2 years in both quantity and value. The most reducing import volume mainly is from the Singapore market with imports volume of 1.82 million tons, down by 45.8%.

 

Import volume

                                             Source: General Custom of Vietnam

 

□ Management Mechanism

 

 ○ Petroleum market in Vietnam has been adjusted by market mechanism for almost 20 years with the positive and untightened management policies from Government. The monopoly in petroleum business was removed, the system of focal importers and distribution enterprises have been established instead with the nationwide distribution networks. Private sectors have joined to the retail phrase more and more and now keep a significant share.

 

 ○ Distribution Network

  - Currently, there are 19 import enterprises also as the first focal business of petroleum in the market. Of which, Petro Vietnam is the principal factor with the largest business network nationwide and has variety of logistic sectors. The next ones are PV Oil, Petec, Saigon Petro, Petechem, Vinapo and some special enterprises such as Military Petro, Aviation Petro, or Maritime Material General Compay.

  - The group of petroleum business enterprises assigned as follows:

   · First group: business enterprises in the country not related to the import operation. These firms belong to different economic sectors (state, private, joint ventures...) taking all types of wholesale, retail and transportation companies.

   · Second group: Focal importers, which are regulated by the State and take part into the circulation of petroleum as the first type group. The main characteristic of this group is the type of State-owned enterprises, the State holds almost shares and controlling of systematic technical facilities of the import process, such as warehouses, ports, shipping facilities..

  - In the whole country, it is estimated a network of more than 300 general agencies with more than 13,000 gas stations, of which, 10,000 gas stations belonging state and general agencies, 3000 from focal or private enterprises.

 

 ○ State management mechanisms and policies

  - Government regulates all management mechanisms on operating petroleum operations, pricing and inspecting and supervising business activities. It regulates the state management of business organizational model, clarifies the functions and tasks of relevant ministries and sectors and the relations and coordination between state management agencies in managing the petroleum market.

  - Of which, Ministry of Industry and Trade makes controlling on business, production, import and export of petroleum; Ministry of Finance controls the retail prices; Ministry of Transports controls logistic and road toll; Ministry of Science and technology controls the quality of petroleum and goods.

  - Government also issued all management policies on petroleum business include of the policies of pricing and taxing; managing oil and gasoline quality standard; and import tariff.

  - Relating to managing the oil and gasoline as well as the products from petroleum:

  - The popular petroleum products in Vietnam now include gasoline, diesel, kerosene, fuel oil, ZA1, and some oil for machines. To each type of petroleum, there are many types of compounds with different quality depending on the technical indicators and chemical content of products. Some technical indicators to assess petroleum products is the proportion of lead, octane, benzene, Aromate, and sulfur.

  - Petroleum products are circulated in Vietnam market via two methods, one is mostly imported and one is partly manufactured from Dung Quat refinery plant and Codensate plants. The petroleum quality standards in Vietnam was issued by Ministry of Science and Technology with the regulations on fuel quality and petroleum quality and the management to subjects or individual related to the activities of import and export, production, processing, preparation, distribution, and retail. These standards are promulgated regulations for each type of petroleum product and a specific methodology to test and check the quality.

  - Simultaneously, Government also issued some laws and regulations to business, production, mixing, quality, import and export, distribution as well as sanctions and penalties to the frauds. Some laws and regulation as reference:

   · Decision 84/2009/NĐ-CP of Prime Minister to petroleum business

   · Decision 26/2006/QĐ-BKHCN regulating the management, inspection and supervision of petroleum products quality circulated in the market and imported from oversea

   · Decision 127/2007/NĐ-CP of standard and technical requirements

   · Circular 19/2009/TT-BKHCN issued by Ministry of Science and Technology for the quality management methods

   · Decision 105/2011/NĐ-CP regulating of administrative sanctions in petroleum business

   · Vietnamese national standard about gasoline, Diesel and biological fuel QCVN1:2009/BKHCN

 

 

2. Fake gasoline Situation

 

□ Fraud on fake gasoline and oil business

 

 ○ It is recorded a sharp rising of fire and explosion of car and motorbike. Just in 3 first months of 2012, there are 115 cases nationwide; many of them can’t give out the reason. Although the investigation from Government has not confirmed the reason from the low quality of fuel, this is still looked as a concern of indirect reason. If the motor using gasoline and oil, which are mixed with harmful additives like acetone with high concentrations, may makes corrode of engine parts, puncture of fuel tank, puncture of plastic piping, degradation of engine seals that cause leakage of gasoline in severity and in the course of transportation on the road. The friction of mechanical parts with electrical spark easily creates a fire-prone. This is showing that, the situation of blending fake gasoline and oil, as well as making business on fake gasoline and oil is a serious and emerging issue in Vietnam now.

 

 ○ As personal estimation, in 2013, the total consumption is around 18.8 million tons (data from Industry Department – Ministry of Industry and Trade of Vietnam. However, the local production is about 7 million tons, import volume of 7.3 tons, export volume of 1.3 tons, inventories of 1.5 million tons. The surplus between the real consumption with the supply is in a significant disparity of around 3 million tons. This volume of gasoline is maybe from the illegal business such as smuggling and fake-making oil and gasoline. This volume is occupying around 20% of consumption volume in the market. This is just a basic estimation; in fact, this number may be much higher for undetected frauds.

 

 ○ The major fraud case:

  - Fraud on quantity (measure): breaking seals, lead seals to adjust, distort gauges, using pumps without inspection or overdue of inspection. Recently these frauds are more sophisticated as the case, electronic chips are mounted on columns halibut and remote control, this behavior is very difficult to detect. The test results, the rate of 20-30 % of the pumps violate the lack of measurement.

  - Fraud in quality: low grade gasoline blended quality and low price (A83, A90, jet fuel, kerosene) into high -quality gasoline (A92, A95) and sold at the price of high quality gasoline and oil

  - Commercial Fraud has caused damage to consumers by estimated of the nearest thousand billion; low quality petroleum causes rapid destructive machines; emissions from dirty-low quality oil damage to the environment and also destroy the faith and reputation in the brand’s major businesses or agents.

  - Some other frauds: hanging signs, logo 's reputable companies to purchase unverified gasoline ; offers the level of high remuneration (commission) and higher freight which causes unfair competition ; taking advantage of the fuel transfer, temporary import - export re-export of petroleum across the border illegally, illicit profits, sales invoices for petrol vouchers "input" for the construction, transportation

 

 ○ One of the most notable reasons of these frauds and illegal business is that the petroleum trading mechanism of Vietnam currently owns many inadequacies. Thus, petroleum business and petrol stations have faced to closure condition or losses. The cost as Government’s regulation is not sufficient to cover the actual cost of such enterprises yards, labor, and transportation. The management and investigation mechanism are still lax and untimely. These make the situation of frauds on blending and making business in petroleum has happened during the long time which makes strong damage to consumers and nation’s treasure.

 

□ Fake gasoline mixing

 

 ○ For profiteering, seller has used a number of sophisticated dispensing tactics to blend gasoline. The most common way is to withdraw gasoline, then add with compounds such as methanol, acetone, mixing A83 gasoline with coloring dye and methanol to become to the A92, adding water to gasoline to increase the volume of gasoline. Particularly, seller also added some additives to make gasoline expand the volume. Even fuel oil, diesel oil was faked by water and renewable diesel or used oil (made from viscous) mixed with some other additives.

 

 

 ○ Gasoline A83 + A92 + green dye (or A82 + green dye)

  - A83 gasoline is mixed with A92, and then added with a little green dye. This mixture is blended by machine in about 15 minutes before delivering. Sometimes green dye is poured directly into A82 tank car without A92. This chemical will spill out and turn yellow of gasoline A83 to the green of A92.

  - Usually, the 12,000 liter tank cars are withdrawn 2,000 liters of gasoline, and 16,000 liters around 4,000 liters. Ultramarine pigments are actually used to fabric dye. This is mixed with a little A 92 gasoline and then refilled into tank cars and spreads the green.

 

 ○ Gasoline + expand-volume additives

  - Most tankers carrying 16,000 liters of gasoline will be withdrawn 4000 liters then mixed with white opaque to expand the volume. A chemical also is used to increase sensitivity (ignition) of gasoline. This chemical is imported from China, which can destruct and corrode iron metal very strongly. Moreover, an effect of this chemical is to dilate gasoline in 2-3 days, so it can steal more volume of gasoline. This type of toxic substance when mixed into gasoline will corrode the fuel tank and carburetor, leading to gas flowing out, high temperature caused the motorcycle on fire.

 

 ○ Water + heavy bunker oil (waste oil) = FO

  - Thousands of liters of water are discharged into drums full of iron (type 220 ​​liter / tank). After measuring the right amount of water, water is sucked up to the tank for mixing with thick black oil, filled with sediment. Aeration works within about 30 minutes, and then creates a mixture of FO.

  - Depending on the orders of each retail sellers (types of mixed oil), it will be added more acid and chunky viscous. Acid used for mixing fuel are floating in the market with the price of 3.5 ~ 5usd/ 30 liters. Waste or black oil were purchased in the market with about 0.8 usd / liter. Averagely, a fake fuel mixing station, produce 30 barrels of 220 liter per one daily.

  - To mix fake FO, commonly 800-1000 liters of water must be added to the 12,000 liter tank cars or based on the request of the buyers.

 

 ○ Recycled oil + low quality oil (aviation oil) = DO

 

 

  - Fake DO is made from recycled oils (cooked from viscous) with a kind of cheap oil. Aviation oil after buying off is delivered to the vertical tank to be mixed with recycled oils.

  - The processing of fake oil is much complicated than fake gasoline. Fake oil makers cooking often collect all kinds of waste oil, waste lubricant (especially from large ships rinsed) to extract the type of poor quality DO and then mixed with clean oil. Even, to increase profits, they also collect all waste from landfills, and make to a mixture filter that only contains some similar properties (but not oil) to be mixed with clean oil for the type dirty oil.

  - At final stage, a turbine spinning is used at extremely fast speed for about 1-2 hours to mix these kinds of oil together, not separated layers in at least 2 days. It’s enough time to transport to the incinerator without finding out. Almost this fake dirty fuel oil is sold to factories, enterprises or private enterprises, which do not have room chemistry experiment. Moreover, the linkage between delivery units and personnel control is also the reason why this cheating business has not exposed yet.

 

□ Fake gasoline distribution

 

 ○ There are currently 19 enterprises (companies) having the right and approval of importing petroleum. Petroleum provides for two systems: dependent business or general independent agency, which can make business directly, general agency will then distribute to their dealers to sell to end user.

 

 ○ According to the first focal importers and regulators, imported petroleum and petroleum produced by Dung Quat refinery plant is controlled very tightly, so there is unlikely situation of poor quality. Storage in the first general agency is also very well managed according to strict procedures including the sample stages closely upon import and export as well as the periodic examination in the preservation process. Therefore, it is possible to acknowledge that most of the violations are from petroleum dispensing behavior of some dealers and retail stores rather during the logistic process, not from import phrase of first focal importer.

 

 

 ○ Accordig to standard procedures, before transporting, warehouse staff always retains a sample of gasoline or oil, the gas station. When coming to the station, dealer also keep a different sample in case of the incident occurred, the management agencies will test and compare 2 samples. Therefore, drivers often withdraw and blend 2 of 4 gasoline tunnels on the tank, then take sample from unblended tunnel. By this procedure, when pouring fake gasoline in the tank of gasoline station, gasoline volume 4 tunnels will be mixed together, and mixed with clean gasoline transported by the others. Drivers also cheat by delivering fake gasoline usually in the noon when the temperature increases highly to take advantage of the expansion of the gas. With such conditions, though withdrawing hundreds of liters of gasoline but just add with a small amount of liquid on the other, the remaining shortfall will be filled by the gas thermal expansion.

 

 ○ Actually, gasoline stored in the general depot is the real clear gasoline. However, for lax management procedure, gasoline easily is blended and counterfeited at any phrases before delivered to the end users, usually at the phrase of transport from depot to distributors or to gas stations.

 

 ○ Currently, the use of lead seals, plastic seals in fuel quality management has been completely disabled. Because there is often a "handshake" between the driver and the transport companies with the checking staff, so the tank trucks, which have sealed off can still freely delivery fake gasoline at gas stations.

 

 ○ Withdrawing gasoline not only happens inside the blending stations, but also blatantly at street. In accordance with process, the tanks cars have to run straightly from the depot to the blending station to withdraw, theft, and mix. However, the drivers do not hesitate to stop right across the street to take out 4-6 cans of 50 liters. This action occurs only within a few minutes the driver then drove to the fake blending station to make withdrawing second time before mixing.

 

 ○ This process of withdrawing and blending can happen frequently and in big scale is not only from drivers, but also from the cooperation, collusion between subjects at all stages of fuel consumption procedure. Therefore, it should tighten the gasoline – oil quality management procedures, especially during transport time.

 

 

□ Prevention and offence control

 

 ○ After the vast of fire cases on motors and cars, Government has conducted all relevant ministries and department in-charge to make all investigation and plan to control offences. Of which, Ministry of Industry and Trade, Ministry of Sciences and Technology, Ministry of Transport take charge in controlling fraud on quality, quantity and transport.

  - Government has established a petroleum distribution system (in accordance with Decision 187 of the Prime Minister and the Decision of the Ministry of Industry and Trade 1505), which regulate the vicarious liability rules of the system (major businesses - general agent - reseller). This distribution system has a positive effect, especially in terms that international oil prices fluctuate constantly. This law also help the state control closer over oil and gas operations; easy monitor for consumers.

  - Government also gives out the forces directing functions: market management, science and technology inspection, police, Border Guard, Customs to strengthen inspection activities and strictly to handle violations. Force function checked annually and handling from 1200-1500 abuses, some fines from 3-5 billion; in some serious violations, government made the withdrawal of the certificate of eligible business; some cases have been criminated prosecution.

  - All relevant agencies are also studying to issue regulation of coloring gasoline and oil before putting out merchandise to the consumer market and the easy force function for checking and monitoring.

  - Government also is considering eliminating the circulation of A83 gasoline (petrol and low- quality, low price, long a source of trade fraud); to review the circulating strains towards gasoline octane has a spacing from each other (eg, A88 - A92 - A95) to easily distinguish the limited test and equivocal situation which may easily lead to commercial fraud.

  - Government aims to force function for quickly checking the quality of petrol vehicles to facilitate the inspection. Law, regulation and sanctions have been reviewed (because of the sanctions measure, ND 57/CP quality not enough to deter and prevent violations).

 

 ○ These measures have had a positive effect. Trade fraud seems to be restrained, but it is still complicated and expression increasingly more sophisticated.