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Vietnam oil refinery to receive US$338 million in compensation

Nghi Son oil refinery operators will be compensated VND 8,247 billion (US$338.1 million) for variations in the price they were permitted to sell their petrol products and the price of the same products imported, Tuoi Tre is reporting.

Key points:

  • Vietnam’s state-owned Petrovietnam (PVN) is required to buy all of Nghi Son’s outputs at the import price, including import tariffs based on most favoured nation tariffs (20 percent), plus an additional 7 percent;
  • However, the South Korea-Vietnam Free Trade Agreement reduced import tariffs on Korean petroleum products to 5 percent extending the 7 percent difference to 22 percent;
  • Part of the agreement with Nghi Son is that when this happens, the refinery will be compensated the difference by the government; and
  • In this case that amounts to US$338 million.

A few additional notes

  • Investors from Kuwait Petroleum International, which has a 35.1 percent stake in the refinery were in the country last week meeting with the local managers;
  • It was suggested last year that the refinery was on track to report a loss of US$1 billion for 2023; and
  • Retail petrol prices are set by the government and have been known to drop below cost price.
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