Singapore — Vietnam is feeling the pressure to secure adequate crude supply as geopolitical tensions in the Middle East continue to raise Asia's energy security concerns, with state-run Binh Son Refining and Petrochemical Co. aiming to ramp up crude imports from the US and West Africa.
As rival Northeast Asian importers actively snap up both sour and sweet spot crude cargoes from a wide variety of sources to cover any potential shortfall in Saudi term supply, Hanoi decided to act quickly to secure its own requirements.
BSR, an affiliate of the state-run Vietnam National Oil and Gas Group (PetroVietnam), will import 2 million barrels of WTI Midland crude from the US in the fourth quarter, a senior company official told S&P Global Platts.
BSR, the operator of Vietnam's 148,000 b/d Dung Quat refinery, will receive a cargo carrying 1 million barrels of the light sweet US crude in October and another cargo in December, the official said.
Dung Quat refinery received its first cargo of US crude back in the second quarter. The Suezmax vessel Almi Horizon arrived at Dung Quat port on April 29 carrying 950,000 barrels of crude loaded from the US Gulf Coast, Platts reported previously.
BSR said the company has also made its maiden purchase of Bonny Light crude from West Africa, with expected delivery in October.
The Nigerian light sweet Bonny Light crude cargo will be supplied by PV Oil Singapore, who in turn bought the cargo from an African trading house, Asian trade sources with knowledge of the deal said.
BSR bought the cargo as it has been actively trying to diversify its feedstock, and the Bonny Light cargo was priced competitively to other light sweet Asian grades of similar quality, the trade sources added.
In addition, BSR will directly sign contracts to buy crude oil from global suppliers from 2020, instead of relying solely on its trading arm PV Oil to conduct all necessary refinery feedstock procurement deals, company sources said.
FALLING OUTPUT, MORE IMPORTS
Vietnam's faltering domestic crude production also makes the case for the Southeast Asian economy to step up efforts to secure more cargoes from overseas, industry sources said.
Vietnam is expected to produce 906,200 mt (214,272 b/d) of crude oil in August, down 3.7% from the same month last year, latest data from the General Statistics Office showed.
Actual domestic crude oil production in the first seven months of 2019 fell 7.5% year on year to 6.65 million mt.
In order to make up for the declining domestic resources, BSR said the company is expected to import a total of 7.45 million barrels of crude in 2019. This would be a near twofold increase from around 3.9 million barrels imported for Dung Quat refinery in 2018, according to latest Customs data.
As a means of supporting BSR's efforts to secure adequate crude supply, the government announced Tuesday it will remove the import duty on crude oil for the domestic refiner effective November 1.
Under the decision signed by Prime Minister Nguyen Xuan Phuc on Monday, the import duty will be cut to 0% from the current 5%, the government said in a statement.
Between January and August, Vietnam imported 5.48 million mt (40.17 million barrels) of crude oil, up nearly 103% from the same period last year, the customs data showed.
MAKING DEALS AT PLATTS APPEC
BSR's general manager Bui Minh Tien visited Singapore earlier this month to attend the S&P Global Platts Asia Pacific Petroleum Conference over September 9-11, the company said in a statement.
Tien and BSR representatives met multiple crude oil suppliers, including Shell, Vitol, BP, Petronas, SOCAR, Glencore, Gazpromneft, Repsol and Sumitomo at APPEC, to discuss possible crude supplies from the US, West Africa, North Africa and the Mediterranean for Dung Quat refinery, BSR said.
"Through the discussions, BSR got promising outcomes in possible crude supplies for Dung Quat. Shell and BP are interested in supplying crude oil or providing advice to help BSR choose the right crude grades," the company said in a statement.
SOCAR has committed to strategic long-term supplies of Azeri Light crude from Azerbaijan for Dung Quat, it added.
-- Gawoon Philip Vahn, philip.vahn@spglobal.com
-- Andrew Toh, andrew.toh@spglobal.com
-- Newsdesk-Vietnam, newsdesk@spglobal.com
-- Edited by Shashwat Pradhan, shashwat.pradhan@spglobal.com