Vietnam plans to implement a 5% ethanol blending mandate for higher octane 95 RON gasoline to promote cleaner transportation fuels and boost demand for biofuels.
The move will help revive Vietnam’s shuttered ethanol plants and help curb dependence on refined product imports, even though it raises concerns about implementation as previous deadlines have been missed. S&P Global Platts reports.
The Ministry of Industry and Trade plans to submit a proposal on the ethanol mandate to the central government for consideration, vice industry and trade minister Do Thang Hai said in a news briefing Thursday, but did not provide a time frame for implementation.
The Southeast Asian country is a net importer of refined petroleum products with rapid growth in oil consumption that nearly doubled to 445,000 b/d between 2006 and 2016, according to the US energy department.
Vietnam’s two main gasoline grades are 92 RON and 95 RON.
On January 1, Vietnam phased out 92 RON, and replaced it with E5 92 RON gasoline, which is a blend of 5% ethanol and 95% 92 RON gasoline. Currently, retailers are allowed to sell both E5 92 RON and 95 RON gasoline at the pump.
In the first two months of this year, Vietnam consumed nearly 1.43 million cu m of E5 92 RON and 95 RON gasoline, out of which 95 RON was 836,293 cu m, or 58.5%, of the total, and E5 92 RON accounted for 593,609 cu m, the ministry said.
The new proposal will mandate that 95 RON gasoline be replaced with E5 95 RON, a mixture of 5% ethanol and 95% 95 RON gasoline.
CHALLENGES TO GASOHOL DEMAND
The proposal is backed by Saigon Petro, an oil importer and retailer in southern Vietnam, which received widespread support at a meeting between industry participants and the trade ministry on April 24.
The companies also raised concerns about poor sales of ethanol blended E5 92 RON.
One obstacle was the lack of an attractive price differential between E5 92 RON and 95 RON gasoline.
At current rates, E5 92 RON is Dong 1,570/liter (6.9 cents/liter), or 8.3%, lower than 95 RON grade III and Dong 1,770/liter or 9.4% lower than 95 RON grade IV. The companies wanted the government to widen the price difference to more than Dong 1,800/liter to boost sales.
Other challenges included consumer concerns that ethanol blends would damage their vehicles, the lack of sufficient E5 stations and, most importantly, ethanol supply constraints.
Currently, refiners and retailers like Binh Son Refining and Petrochemical, Petrolimex and PV Oil buy ethanol from the only local supplier, Tung Lam Ltd Co.
Vietnam had six ethanol plants with a combined design capacity of 535 million liters/year, but most have suspended operations due to low demand, feedstock supply problems and poor margins.
State-run Petrolimex, which accounts for about half the local market for fuels, said production of E5 92 RON had become costlier recently due to price rises of ethanol by Tung Lam.
The ethanol supplier, in turn, blamed price increases on rising input costs for raw materials like cassava, a biofuel crop.
Plans for opening suspended ethanol plants are under way. PV Oil said on April 12 it hoped to open its Binh Phuoc plant, or Orient Bio-Fuels, in the southern province of Binh Phuoc later this year.
In December, BSR said it would open its Quang Ngai plant, Central Bio-Fuels, near the Dung Quat refinery in 2018.
Binh Phuoc and Dung Quat have the capacity to produce 100,000 cu m/year of ethanol each. Tung lam can produce 200,000 cu m/year of ethanol, the industry and trade ministry said last July.
Traders estimated Vietnam’s total ethanol demand of around 300,000 cu m will be fully met when the new plants start operations.
Additionally, Vietnam has also allowed imports of ethanol for domestic use, according to vice minister Hai.
By Christina Siantar, Eric Yep, Edited by Daniel Lalor