Petrolimex seeks to end jet fuel monopoly in Vietnam

The online newspaper VietNamNet quoted Chief Executive Bui Ngoc Bao as saying Petrolimex’s subsidiary PJF had received a license to import jet fuel and was waiting for final approval from the Ministry of Transport to sell the fuel to carriers.

If approved, PJF will start its business in Vietnam next month. The company was allowed to sell jet fuel to Cambodia in April and is supplying about 2,000 tons of fuel a month to the neighboring market.

All jet fuel sales at airports are now handled by Vinapco, a unit of state-owned Vietnam Airlines. Vinapco was fined VND3 billion (US$168,300) in April for cutting off fuel supply to Jetstar Pacific on April 1 last year following an argument over prices.

The government has planned to eliminate all monopolistic practices in the domestic jet fuel market, the online newspaper quoted Lai Xuan Thanh, deputy director of the Vietnam Civil Aviation Administration, as saying.

He said the government would enable competition but at the same time restrict the number of suppliers to ensure stability in the market.

The administration may keep the number at two only, VietNamNet said, citing a source.

Besides PJF, Ho Chi Minh City-based Tapetco has also applied to supply jet fuel at airports in Vietnam, the newswire reported. Another company, Military Petrochemical Joint Stock Company in Hanoi, expressed an intention to join the market too.

Vinapco forecasts that Vietnam’s jet fuel demand in 2009 will rise 4.1 percent this year compared to 2008 to around 600,000 tons.

Last year, the total jet fuel demand in Vietnam was equal to only between one tenth and one eighth of that of Singapore or Hong Kong.

Vietnam Airlines accounted for around 70 percent of the total jet fuel demand last year. Other local airlines - Jetstar Pacific, VASCO and Indochina Airlines - accounted for more than 10 percent while international carriers made up the rest.

Tran Huu Phuc, director of Vinapco, said trading jet fuel in Vietnam was a “risky business” as it required a huge investment for facilities and staff.

He said if new fuel suppliers were allowed to enter the market, they could only supply fuel to foreign carriers, which buy a mere 90,000 tons of fuel in total per year.