A view of the Dung Quat oil refinery (Photo: VNA) Hanoi (VNA) - Despite being hit hard by falling oil prices and COVID-19 in the first half of 2020, the Dung Quat Oil Refinery maintained operations via various means and is now ready for the recovery phase in the second half of the year.
Unprecedented difficulties
Bui Minh Tien, General Director of Binh Son Refining and Petrochemical (BSR), which operates the Dung Quat plant, emphasised that the first half of this year was the most difficult period BSR has ever faced.
The impact of COVID-19 from mid-February to mid-April dragged down oil prices, causing several problems for distribution of the plant’s products. Inventories skyrocketed, at times reaching 90 percent, with tanks filled with oil and the plant facing the possibility of closure.
In April, key revenue earner Mogas 95 saw the company lose 2.98 USD a barrel. Overall, crude oil prices nosedived.
According to the S&P Global Platts Insight magazine, which showcases pricing, news, and analytics across global energy and commodities markets, crack spreads were mostly negative between the end of March and the beginning of April. Crack spread refers to the overall pricing difference between a barrel of crude oil and the petroleum products refined from it.
Facing such difficulties, BSR leaders focused on maintaining the plant’s operations and applying various measures to keep the plant from closure. These included optimising the use of processed crude oil, adjusting production to market demand, and cutting inventories to make room for low-priced barrels.
The company also maximised its distribution of crude oil within the country, to boost value chain links in the sector and seize spot contracts with domestic clients. It also closely followed developments in the market, stepped up forecasting and analysis, and optimised the trade of high-value immediate products.
Meanwhile, good cost saving and currency flow management, on-time payment for crude oil, and negotiations with oil suppliers for longer repayment periods and lower delivery fees led to more effective production and business.
As a result, the Dung Quat Oil Refinery ran stably in the period, with average capacity surpassing designed capacity by 5 percent. It produced a total of some 3.43 million tonnes of oil, exceeding the target by 6.7 percent. Total consumption hit approximately 3.35 million tonnes, or 4.3 percent higher than planned.
Spotting profits following negative revenue
According to BSR, despite posting losses in April and May, the company got out of the negative situation in June and began to reel in profits totalling over 1 trillion VND (43.2 million USD).
General Director Tien said that in the second half, the company plans to produce and distribute about 2.5 million tonnes of products and earn 23.6 trillion VND, contributing approximately 2 trillion VND to the State budget.
In the third quarter, BSR will carry out the fourth overall maintenance of the refinery to ensure safety, quality, and cost saving. Meanwhile, more investment will be poured into scientific research, particularly on diversifying crude oil sources, on the optimisation of capacity at the plant and workshops, and on product restructuring.
Dung Quat is in the central province of Quang Ngai and was the first-ever oil refinery in Vietnam, with an annual capacity of 6.5 million tonnes of crude oil. It applies cutting-edge technologies from the US and the EU and is capable of processing about 57 different types of crude oil with high API quality and low sulphur content. The refinery uses 85 percent locally-sourced and 15 percent imported materials./.
VNA
