The gas price always goes up and down in accordance with the crude oil price. However, a strange thing has been happening: While the crude oil price stays at low level, now at $41/barrel, the gas price on the world’s market in the first two months of the year increased by $167.5/tonne in comparison with December 2008.
This has prompted domestic gas firms to raise the gas price by VND20-30,000/12 kg tank so far this year.
A 13 kg tank of Petrolimex is now retailing at VND265,000/tank, while 12.5 kg tank of Elf Gas Saigon has seen the price up by VND35,000 over the previous month, to VND230,000, and 12kg tank of Shell Gas at VND240,000.
On average, the retail price of a 12kg gas tank in the north is hovering around VND230-240,000/tank. The prices in the south prove to be lower by VND10-20,000.
Gas importers say that they have to raise domestic prices because the world’s price has surged from $337.5/tonne in December 2008 to $505/tonne. The importers say that the big imbalance between supply and demand in the world’s market has led to the wide gap between the crude oil and gas prices. While OPEC countries have cut crude oil output, leading to the decrease of associated gas output, the demand for heating in cold winter in the countries in the Northern Hemisphere has been increasing.
In the domestic market, supply has become short as enterprises have not imported a big volume because the gas price has been on the decrease. Meanwhile, the gas demand has soared again as the gas price has decreased by 30-40% in comparison with that in mid 2008. The demand increased sharply in January also because this was the Tet month.
The shortage of gas has occurred in many cities and provinces. An official from Shell gas said that many sales agents in Bac Giang, Vinh Phuc and suburban areas of Hanoi have complained they did not have gas to sell for two weeks on the pre-Tet and Tet days.
The owner of a Petrolimex’ gas sales agent in Ngo Quyen district in Hai Phong city said that she ordered 20 gas tanks, but the distributor provided just in dribs and drabs, three tanks per time.
Analysts have also blamed the limited capability of gas trading firms on the sharp price increases.
There are some 80 LPG trading firms nationwide, while Vietnam imports gas equivalent to 70% of demand. The problem lies in the fact that the gas depots of gas firms all have small capacity. Except the storage of Dinh Co plant in Vung Tau City, which has the capacity of 25,000 tonnes of gas, other storages, which are considered big, just have the capacity of 3,000 tonnes.
The wharf system in Vietnam is just capable of receiving small ships, 1,000-1,500 tonnes. Meanwhile, in Thailand, 50,000 tonnes ships can approach docks.
Poor technical conditions, slowly developing transport means and the lack of overall development plans are problems that Nguyen Ngoc Son, General Director of Gas Products Trading Corporation, pointed out.
Due to the limited capability of storages, Vietnamese gas importers cannot purchase products at original prices as announced by Middle Eastern companies; they have to import gas from neighbouring countries like China, Malaysia and Singapore, and through many intermediaries.
For example, $505/tonne was the price quoted by Arab Saudi’s Aramco for February 2009. However, the prices at which Vietnamese companies import are calculated by the quoted price plus other expenses, which make the import price 10-15% higher.
Meanwhile, in Vietnam, pre-tax sale prices are pushed up higher after importers add expenses like storage, transport, distribution and profit.
According to Tran Minh Loan, Director of Alpha SG, the ‘other expenses’ are very high, some $150/tonne.
If Vietnamese companies had big storage capacities and big ports, they would be able to import products in large quantities and at good prices. However, as no company has such conditions, they just can import in small lots. As a result, Vietnamese customers always have to pay more for the same products than the consumers in other regional countries, according to Nguyen Si Thang, Chairman of Southern LPG Trading Corporation.
It is estimated that it takes some $300mil to build a 60-70,000 tonne LPG storage. (VNN)
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