Market and product

The fuel sector is capturing the attention of quite a few domestic investors thanks to good profitability whereas foreign investors are not yet allowed in.

Originally a liquefied petroleum gas (LPG) trader, Pacific Petro Commercial JSC has recently decided to set foot into the fuel market with the establishment of gas stations. So far, the company has set up three Saigon East pumping stations, with two of them in HCMC and one in Dong Nai.

Talking to the Daily, Le Quang Tuan, sales manager of Pacific Petro, said his company was now an agent of Vietnam National Petroleum Group (Petrolimex), but would become a wholesaler, who is responsible for importing, exporting, distributing and even retailing fuels.

“We intend to apply for a wholesale license when having opened five gas stations,” Tuan said. He asserted his firm’s determination to achieve the goal of setting up 10 stations in the near future.

He said the fuel market was luring new players, especially those specializing in LPG. The reason, he said, is cooking gas business is no longer as easy as before due to unexpected adjustments and imposition of business conditions that have brought losses to enterprises.

Meanwhile, the fuel market is attractive with high profit margins thanks to big discounts, around VND1,000 per liter, higher than specified in the base price structure, or even VND1,200 when world prices go down.

Wholesalers offer generous discounts due to strong competition and good gross profit buoyed by the import tax difference.

This is also why wholesalers and general agents are actively opening new retail outlets. A gas station of about 2,000 square meters in HCMC costs some VND20 billion.

The Ministry of Industry and Trade informs there are now 29 fuel wholesalers in the country. The number is rising rapidly, with at least five new names this year.

Most recently, this October, the Trade Ministry officially granted Petro Binh Minh Co. Ltd. in Quang Ninh a wholesale license. This company has started work on their Mong Duong Petroleum Depot.

Although there are 29 operational wholesalers, half of the fuel market is still in the hands of Petrolimex. This wholesale business has around 2,500 affiliated retail outlets, not counting the franchised establishments.

The sector has always attracted the interest of many foreign investors. However, the fuel retail market has not yet to be opened because under Vietnam’s commitments, foreign companies are prohibited from franchise, distribution, import and export of fuels.

So far, only Idemitsu Q8 Petroleum LLC as a partner in the Nghi Son oil refinery project has obtained a license to set up a 100% foreign-invested filling station. This outlet will be located near Noi Bai airport with import sources. - VNN