PetroVietnam mothballs ethanol plants due to unprofitable markets

Vietnam’s state-owned oil company PetroVietnam has confirmed that its Dung Quat bioethanol plant has halted its operation due to high production costs making its products uncompetitive in the market. 

As petrol prices have been falling in the world market, E5 biofuel cannot compete with RON92, and as a result, the plant has stopped production after a long period of running at moderate level. 

PetroVietnam Central Biofuels (BSR-BF) was set up with three founding shareholders, all subsidiaries of PetroVietnam, consisting of Petrosetco, Binh Son Oil Refinery, and PetroVietnam Finance Co. (PVFC).

Dung Quat Bio-Ethanol, with the designed capacity of 100 million litres of ethanol a year, has total investment capital of VND2.219 trillion (€87.7m).

Besides Dung Quat, PetroVietnam has also invested in two other biofuel plants, with PV Oil, one of its subsidiaries, now holding the controlling stakes in Orient Bio Fuel Company (OBF) and PetroVietnam Biofuels (PVB).

PVB was established in December 2007 with capital contributed by PV Oil, SeABank, and other shareholders.

The ethanol plant, located in Tam Nong district of Phu Tho province, has been developed with investment capital of VND1.7 trillion and has capacity of 100,000m³ of ethanol.

OBF was established in May 2009 under the cooperation contract of PV Oil, which contributed 51% of capital, and Japanese Itochu, which contributed the remaining 49%.

The VND1.7 trillion OBF ethanol plant, with the capacity of 300,000 litres a day, is located in Binh Phuoc province.

PetroVietnam, when announcing investment in the three plants, stated that developing biofuels was one of the priority objectives of the oil and gas industry development strategy.

However, the biofuel projects that PetroVietnam wanted could not operate as expected, and the construction of the Tam Nong project stopped in late 2011.

The Binh Phuoc ethanol plant, after two years of construction, was put into trial operation, but as the biofuel could not be sold, the plant has halted operation and workers have been laid off.

Besides the three PetroVietnam-invested biofuel plants, Vietnam has four other plants – Dai Tan Ethanol Plant developed by Dong Xanh, Dai Viet, Dak To, and Tung Lam – all of which are in the same situation.

According to the Ministry of Industry and Trade (MOIT), there are five enterprises which have organised the production of E5 fuel in Vietnam, including PetroVietnam and Petrolimex.

E5 petrol is distributed in seven provinces and cities in Vietnam, including Quang Ngai, Da Nang, Hanoi, Ho Chi Minh City, Hai Phong, Ba Ria-Vung Tau, and Can Tho.