Vietnam's Nghi Son oil refinery is seeking approval to export oil products as high inventories and pre-existing import contracts have limited domestic fuel demand, Reuters reported.
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"We have been selling part of our fuel output to the local market, but local traders and consumers are unable to absorb all of our products because they have already placed long-term orders with international suppliers, pending our official commercial production," the source said.
If the approval is granted, this would be the first time Vietnam, a net importer of fuels, has allowed oil product exports produced domestically. The fuel shipments could also weigh on regional margins at a time when supplies are expected to start flowing from new projects in Malaysia and China.
Nghi Son Refinery and Petrochemical LLC, the operator of the 200,000 barrels-per-day (bpd) refinery in the central province of Thanh Hoa, has ramped up output to more than 50% of capacity since starting up earlier this year and this has contributed to high fuel inventories, the sources said.
Vietnam's imports of oil products in July fell to its lowest since January 2016, shipping data from Thomson Reuters Eikon showed.
Fuel inventories are high amid weak domestic sales and higher refining output, a Vietnam-based industry source said.
"Vietnam has a surplus of diesel and gasoline and sales are especially bad for gasoline with cargoes selling at a heavy discount," the source added.
Nghi Son, the country's second refinery, is scheduled to reach full capacity by the fourth quarter of this year, the first source said.
The refinery sold its first cargoes of gasoline and diesel in May and exported its first petrochemical shipment in June.
Nghi Son and the 130,000-bpd Dung Quat refinery that started up production in 2009 are expected to jointly meet about 70% of the country's refined oil product demand.
The plant is scheduled to import six million tonnes of crude oil and churn out four million tonnes of refined products this year, the company said in a statement late last month.
The US$9 billion refinery is 35.1% owned by Japan's Idemitsu Kosan Co, 35.1% by Kuwait Petroleum, 25.1% by PetroVietnam and 4.7% by Mitsui Chemicals Inc.
