E5 bio-fuel consumption awaits breakthrough

According to the government’s roadmap, eight provinces and cities have to sell E5 bio-fuel since June 1, 2016, while other localities have to strive for 50 percent coverage of E5 petrol. However, the situation seems unchanged.

Sad story of production

The Vietnam Oil and Gas Group (PetroVietnam - PVN) has taken the lead in establishing a biological energy development strategy approved by the prime minister. However three biological energy production projects of PVN and its members have been suspended.

The Binh Phuoc Ethanol Plant is invested by the Phuong Dong Biological Energy Co., Ltd. Its owners included the Japan’s Itochu Corporation (49 percent), Licogi Co. (22 percent) and PV Oil (29 percent).

When the plant started its production, the world oil price was as high as US$140 per barrel; however, the current price is around US$50 per barrel. Therefore, it is difficult for E5 bio-fuel to compete with traditional fossil fuel. Furthermore, cassava price for ethanol production has increased rapidly, from VND2,000 per kg in 2008-2010 to VND3,500 up to now, and briefly soared to VND4,500-5,000 per kg. The Itochu Corporation has to transfer its entire stake in the Binh Phuoc Ethanol Plant to the Toyo Thailand Company, which is expected to restart in 2018 in a good economic condition.

Quang Ngai E5 Plant is another project developed by PVN when the oil price was US$140 per barrel. However, it has to stop operation in late April 2016 due to low E5 demand.

The third E5 project in Phu Tho Province with 39 percent of capital from PV Oil has been suspended due to the low oil price and unqualified contractor.

Other plants are in the same situation when domestic consumption and exports are both in difficulty.

Strategic policies needed

The key problem of E5 bio-fuel is its high price. In addition, tax incentives remain unattractive to encourage stronger investment from businesses.

To effectively implement the biological energy development scheme by 2015, with a vision to 2025 approved by the government, it requires new tax mechanisms and policies in building material areas, developing distribution channels, encouraging and creating favorable conditions for domestic and foreign businesses to invest in biological energy development. Raising community awareness about the benefits of E5 bio-fuel is also mentioned.

Le Kim Lien / ven