Vietnam's fuel imports may drop as Dung Quat oil refinery tax cut finally felt
SINGAPORE/HANOI (Reuters) — Vietnam's fuel imports may drop as the effects of a tax cut on sales of gasoline and diesel fuel from the country's Dung Quat oil refinery start to be felt as earlier term contracts expire.
Vietnam's government allowed Dung Quat's operator Binh Son Refining and Oil Co, starting on Jan. 1, to lower its tariff on domestic gasoline sales to 10% from 20% while the tax on other oil products including diesel was lifted, Binh Son Chief Executive Officer Tran Ngoc Nguyen said on Monday.
The reduction allowed Binh Son to match the current 10% tax on gasoline imports from South Korea established under a free-trade agreement (FTA) and the tax-free status for diesel sales from countries in the Association of Southeast Asian countries (ASEAN) under a different FTA.
"Before January, taxes on Binh Son's oil products are always ... higher than imported products, making our product prices high and they cannot be sold," Nguyen told Reuters.
The lower taxes are expected to reduce imports of gasoline and diesel into Vietnam, denting overall profit margins for the oil products, four fuel traders told Reuters on Monday.
While the tax reduction was effective from January, local importers had already agreed to long-term fuel contracts with Binh Son in December, meaning they missed the lower taxes, the four traders said.
The tariff reductions were announced in September but would only apply to contracts signed in 2017, said Nguyen.
Dung Quat's full-year production this year is expected to reach 6.1 MMtpy, equivalent to about 122,000 bpd, nearly 20% higher than its initial target as a result of the lower taxes, said Nguyen.
The refinery, currently Vietnam's only operating refinery, has a total capacity of 6.5 MMtpy.
From 2024, the gasoline sales tax will be lifted in line with other free-trade agreements signed by Vietnam, said Nguyen.
Reporting by Jessica Jaganathan in SINGAPORE and Mai Nguyen in HANOI; Editing by Christian Schmollinger
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