Wednesday, August 18, 2010

Tangle of rules slows use of Dung Quat jetfuel in Vietnam

VietNamNet Bridge – The first consignment of jetfuel produced at Dung Quat Refinery has been exported instead of sold to a domestic customer. The business newspaper, Dau Tu, asks “Why do foreign partners buy Vietnam’s jetfuel, but not Vinapco?”

The first consignment of jetfuel produced at Dung Quat Refinery has been exported

Jet fuel supply monopoly remains in place, for now

Made-in-Vietnam oil runs from Dung Quat

Dung Quat refinery to expand

Everything’s ready but the permit

Nguyen Hoai Giang, General Director of Binh Son Refinery Company (BSR) says there’s no question that Jet A1 of Dung Quat Refinery meets the international standard for Jet A1 petrol (AFQRJOS - issue 24). However, regulatory red tape still prevents Dung Quat from marketing it in Vietnam, so the refinery’s first consignment of jetfuel has been sold to a foreign client, BP Trading in Singapore.

Vietnam Air Petrol Company (Vinapco) is the main aviation fuels distributor in Vietnam. Giang hinted that Vinapco needs some more time to arrange to purchase Dung Quat’s Jet A1, because Vinapco has never purchased jetfuel made in Vietnam.

Tran Huu Phuc, Vinapco’s CEO, explained. He says Vinapco really wants to buy jetfuel from Dung Quat to conserve foreign currencies. However, says Phuc, Vietnamese regulations require that any materials, accessories, or chemicals used for aircraft must go through an inspection process before Vinapco can buy them. That means that Vinapco can only buy Jet A1 from the suppliers approved by aviation authorities.

“Everything is strictly controlled not only because aircraft are expensive assets, but also because any troubles will affect the life of many people. In the aviation industry, safety is the top priority,” Phuc said.

The Civil Aviation Administration (CAAV) has authorized Vietnam Airlines Corporation to approve fuel suppliers.

Vinapco and PV Oil, a unit of PetroVietnam, told Dau tu newspaper that two years ago, the two parties agreed in principle that if jetfuel was produced at Dung Quat Refinery, Vinapco would buy it. In June 2010, a contract was signed that detailed delivery conditions, prices and payment methods.

Further, when Dung Quat Oil Refinery officially released Jet A1, Vinapco guided PV Oil to gather documentation in support of its proposal to to Vietnam Airlines. At that time, Vinapco sent three samples from the refinery to independent laboratories in Vietnam and Singapore. The labs all reported that the samples meet the standards for jetfuel.

Vinapco says it has arranged storage and material facilities to receive about 15,000 tons of jetfuel each month from Dung Quat.

Jumping the final hurdle

Dau tu reports that Dung Quat refinery’s jetfuel still cannot be sold to Vietnamese clients because it has not met one of the two requirements set by the aviation authorities.

An air petrol supplier has to prove either that it has sold Jet A1 to a civil air carrier or to a partner, or that the product was manufactured according to the quality control standards of ISO 0991:2008, ISO 14001:2004 và OHSAS 18001:2007.

Thus PV Oil and Dung Quat Refinery arranged to sell the first batch of Jet A1 to a foreign partner.

A petrochemical expert comments that Shell and BP are multinationals that have much experience. They have laboratories to test products, so they can easily test the quality of the petrol made by Dung Quat. Vietnamese enterprises do not have such good conditions, the expert notes, and therefore must be cautious

Dau tu sources said that Shell was to become the first client for Dung Quat’s Jet A1 because that company was the quality consultant for the product. However, before an agreement was reached with Shell, the first consignment of jetfuel was sold to BP Trading at a very attractive price.

In the future, even if Vinapco purchases petrol from Dung Quat, it will still have to import substantial quantities of jetfuel from foreign countries. Dung Quat can provide only 120,000 tons of petrol in 2010 and, when it operates at full capacity in 2011 and thereafter, from 200,000 to 300,000 tons per annum, or just 30 percent of Vinapco’s current demand.

Phuc of Vinapco says that “now that Dung Quat has sold jetfuel to BP Trading, our aviation authorities can confidently approve the fuel for use here. As soon as we have permission, we will buy jetfuel from Dung Quat, because we are short of foreign currency.”

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