Decision No. 2412/QD-BCT dated May 17, 2011 of the Ministry of Industry and Trade approving Planning of developing production, distribution system of gas and oil in the 2010 – 2020 period with orientation toward 2025

DECISION

APPROVING PLANNING OF DEVELOPING PRODUCTION, DISTRIBUTION SYSTEM OF GAS AND OIL IN THE 2010 – 2020 PERIOD WITH ORIENTATION TOWARD 2025

MINISTER OF INDUSTRY AND TRADE

Pursuant to the Decree No.189/2007/ND-CP dated December 27, 2007 of the Government stipulating function, duties, authorities and organizational structure of the Ministry of Industry and Trade;

Pursuant to the Decree No.92/2006/ND-CP dated September 07, 2006 of the Government and the Decree No.04/2008/ND-CP dated January 11, 2008 of the Government on amendment, supplement of a number of Articles of the Decree No.92/2006/ND-CP on the formulation, approval and management of socio-economic development master plans;

Pursuant to the Decision No.223/QD-TTg dated February 18, 2009 of the Prime Minister approving planning on development of Vietnam Oil and Gas branch in the period of up to 2015 with orientation toward 2025 and the Decision No.1139/QD-TTg dated July 31, 2010 on approving the development planning of reservation system of crude oil and petroleum products of Vietnam toward 2015 with vision toward 2025;

Pursuant to the Notice No.133/TB-VPCP dated April 20, 2009 of the Government Office on scheme to promote development and strengthen state management for distribution systems on the retail market at present and following years of Vietnam;

The Decision No.2358/QD-BCT dated May 19, 2009 of the Ministry of Industry and Trade on promulgating the plan for implementing to make the development planning of distribution, production systems of a number of essential goods for production and social life in the 2010 – 2020 period with consideration toward 2025 and Decision No.5721/QD-BCT dated November 13, 2009 of the Ministry of Industry and Trade on approving plan and cost estimation of project “the development planning of distribution, production systems of gas and oil products in the 2010 – 2020 period with vision toward 2025”;

Pursuant to the result of appraising the Scheme “the development planning of distribution, production systems of gas and oil products in the 2010 – 2020 period with vision toward 2025” dated January 21, 2011 of the appraisal council of the Ministry of Industry and Trade;

Pursuant to the Statement No.063/2011/PEC-TK-TTr dated January 24, 2011 of Petrolimex Engineering Company;

At the proposal of Deputy Minister of Energy Department,

DECIDES:

Article 1.To approve “Planning of developing production, distribution system of gas and oil in the 2010 – 2020 period with orientation toward 2025” with the major contents as follows:

1. Point of view of development

- To develop systems of petroleum production and distribution uniformly, efficiently, safely, with multidisciplinary, interdisciplinary and consistent with the general development of the country, in accordance with the development planning of the industries, the localities and development trend of the domestic petroleum market.

- To develop systems of petroleum production and distribution in order to stabilize production capacity of petrochemical plants, ensuring circulation and stabilizing the market of consuming petroleum products to all regions of the country, contributing to ensure energy security.

- To minimize impacts on the economy in case of oil supply on world markets being decreased irregularly and contribute to increase economic efficiency certainly in case the world oil price is changed suddenly.

- To ensure state sector playing a key role and encouraging maximum participation of other economic sectors in the domains of processing production, service, transportation, distribution…

- To develop sustainably, link between economic development with economical use of natural resources and ecological environment protection.

- To develop petroleum production and distribution systems associated with maintaining political stability, social welfare, security and defense assurance.

- To plan the policies of petroleum manufacture and distribution appropriate for each stage of socio-economic and market development with orientation.

2. Object of development

- To identify needs and ability to build a system of oil refineries, infrastructure, distribution of petroleum products (terminal, transportation systems, retail systems ...) to ensure domestic consumption demand and export.

- To ensure the petroleum security in the situation that petroleum supply and demand in the world always to be fluctuated, changed in the negative direction for the importing coutries of petroleum such as Vietnam.

- To exploit and take advantage of existing production capacity, the ability to build new refineries, petroleum processing firms; to add terminal system of petroleum, petroleum transportation system in the whole country and the provision regions in the 2010 - 2020 period and orientations toward 2025.

- To continue to invest and build refineries aiming to meet the rising demand for raw materials and fuel of the local market, gradually replacing import of petroleum products, orienting for exporting some products abroad. Along with the oil refinery project, the other processing projects to diversify sources of production and product types shall be implemented (condensate, biofuels, v.v…).

- To layout the distribution system reasonably, safely, effectively, and ensure to timely supply fuel with a reasonable price. To ensure stability for domestic oil and gas market, having no poor quality products affecting the environment.

3. Orientation of development

3.1. Orientation of development for petroleum production system

- Orientation on oil filter: to combine sources of domestic exploited crude oil with imported crude oil sources to build and expand the refineries according to the planning of developing the oil and gas industry approved. To speed up the construction schedule of petrochemical plants, complete the expansion and construction of 6-7 petrochemical refineries toward 2025 with a total refining capacity from 45 to 60 million tons/year.

- Orientations for development of biofuels: to implement and improve the existing biofuel plants which are invested for construction to meet demand for gasoline blending E5, E10, B5, B10, and proceed to export.

- Condensate processing orientation: to take advantage of the domestic exploited source of condensate with imported one to produce gasoline; to consider the construction more or expansion of existing plants to increase production capacity and quality of domestic petroleum products.

- To build strategic reservation storage system of crude oil for the refineries contributing to ensure production and energy security.

3.2. Orientation of development of gasoline distribution system

- To set up and upgrade the large distribution systems of contact enterprises with the State capital as the core in the whole country for products consumption of domestic refineries and imported petroleum. The distribution centers were built in sync on organization (corporations, companies, branches, enterprises ...) and infrastructure, material and technical capacity (system of terminal hubs, rear depots, yards, transport systems …).

- To develop a network of direct gasoline retail of enterprises and systems of general agents, agents with system of rear depots, retail stores to each locality, commune/ward.

- To optimize the roads for gasoline transportation, especially research to build new major pipelines in some areas to connect from the refineries to major consumption centers to minimize transportation costs, loss and difficulty when transporting by water, land from the terminals in the coastal areas to major consumption centers and the remote, mountainous areas and border.

4. Development planning for petroleum production and distribution system

4.1. Development planning of production system

4.1.1. Refineries and condensate processing plants

Basically, to follow the Decision 223/QD-TTg on February 18, 2009 of the Prime Minister approving the planning on development of the petroleum industry of Vietnam in the period toward 2015 with orientation toward 2025, specifically as follows:

- The toward 2020 period: to upgrade and expand the Dung Quat oil refinery up to from 8 to 10 million tons of crude oil/year. To begin the construction and operate the Nghi Son petrochemical combination with a capacity of processing 10 million tons of crude oil/year, Nam Van Phong with processing capacity of 10 million tons of crude oil/year, Long Son petrochemical refineries with processing capacity of 10 million tons of crude oil/year and the Vung Ro oil refinery with a processing capacity of 4 million tons of crude oil/year.

- Orientation of the 2020 - 2025 period: to complete the capacity expansion of the Nghi Son petrochemical combination and Long Son oil refinery with a capacity of processing 20 million tons of crude oil/year. To estimate to construct new or upgrade and expand existing plants (1-2 plants) with oil processing configuration to ensure national energy security on fuel products and diversification of other petrochemical products.

4.1.2. Bio-fuel plants

In the toward 2015 period, to implement the investment of construction and operate the bio-ethanol plants in Phu Tho, Quang Ngai, Binh Phuoc with capacity of each plant of 100,000 tons/year in accordance with the approved plans. After 2015, depending on the market demand, the ability of raw material source and efficiency of operation of the plants built and energy security objectives, food security, the environment that the other bio-ethanol and biodiezen manufacturing plants would be considered for additional investment.

4.1.3. Crude oil storage for oil refineries

To continue the implementation and deployment of reserved crude oil storage systems according to the Decision 1139/QD-TTg July 31, 2009 of the Prime Minister on approving the development planning of crude oil reservation system and petroleum products of Vietnam toward 2015, vision toward 2025: by 2025, reserve about 2,2 million tons of crude oil (about 3.1 million m3 of storage), of which 500,000 tons of imported one equivalent Bach Ho oil and 1,7 million tons of crude oil of the Middle East. To develop crude oil containing underground storage system in the toward 2025 period, including: Long Son storage with capacity of about 1 million m3, Nghi Son storage with a capacity of about 1 million m3, Van Phong storage with a capacity of about 1.1 million m3.

4.2. Development plan for the distribution system

4.2.1. Development of petroleum storage systems

a. National reservation storage of petroleum

The development of storage system of oil and gas for national reservation is implemented according to item 2 – Annex 1 of the Decision 1139/QD-TTg dated July 31, 2009 of the Prime Minister.

b. Commercial storages

To develop the commercial petroleum storage systems aiming to ensure a minimum capacity as prescribed in the Decision 1139/QD-TTg July 31, 2009 of the Prime Minister. Because the construction progress of the Long Son, Nam Van Phong and Vung Ro oil refineries is deployed slower than planned, the adjustment to speed up investment of petroleum storages should be considered to ensure sufficient capacity of receiving contact terminal. To supplement the construction of rear depots in the fuel consumption center areas and along the new oil pipelines.

Development scale of commercial petroleum storage capacity in the regions is provided in Annex 1.

List of investment projects of commercial petroleum storages is in Annex 2.

4.2.2. Development of petroleum transport system

a. Development of specialized petroleum ports

Besides the existing petroleum ports and the ports having investment projects, the new specialized petroleum ports need to be set up detailed planning for submission to the Ministry of Transport to add into the detailed planning of the Vietnam port system toward 2020, mainly consists:

- Northern region includes the ports: Lach Huyen and Cai Lan ports (Quang Ninh), Dinh Vu (Hai Phong).

- Central Northern region includes the ports: Hon La port (Quang Binh).

- Central Coastal region includes the ports: Ke Ga (Binh Thuan), Nhon Hoi, Binh Dinh, Cam Ranh (Khanh Hoa).

- Mekong delta region includes the ports: Soai Rap (Tien Giang) and Tra Cu (Tra Vinh).

b. Development of the major petroleum pipeline

- To improve and upgrade in sync the leading major pipeline B12 to increase pumping capacity is at least 5 million m3 per year (including the expansion of storage capacity on the pipeline and upgrading the main pumping stations, priming pumping stations in the warehouse and upgrading the pipelines connecting the storage).

- To construct newly main pipelines:

1. Pipelines of the refineries in Nghi Son - Ha Nam - Ha Noi - Hoa Binh

Urgently research in detail and deploy to build the pipeline system (including 02 branches of pipes) from the Nghi Son petrochemical refinery connected to the main pipeline systems B12 in the warehouses Hanam, pumped for transfer upon the pipeline B12 to the Nam Phong warehouses (Phu Xuyen, Ha Noi), K132 (Hai Duong) and Duc Giang (Hanoi). To develop more new pipe branches to pump from the Phu Xuyen Luong Son (Hoa Binh) to provide for areas of Hanoi West and the North West. To develop more the storages on the route of Thanh Hoa, expand Ha Nam warehouse, Phu Xuyen, to build newly the warehouse of Phu Thi, Luong Son. The total length of Nghi Son - Ha Nam route is about 210 km, Nam Phong – Luong Son route is about 50 km with the 2013 to 2016 implementation period.

2. The Pipeline of Vung Ang (Ha Tinh) to Cha Lo border gate (Quang Binh) to supply to Laos

To research the capacity of building pipeline system from Vung Ang storage passing to the districts of Ky Anh, Quang Trach, Tuyen Hoa and Minh Hoa with the total length of 228 km. To build newly pipelines entrepot into Laos at the Cha Lo border gate area with storeage capacity 10,000 m3 in the period from 2014 to 2016.

3. The Pipeline to the North Highlands (Phu Hoa - Quy Nhon storage to Pleiku)

To research and build pipeline system of Phu Hoa/Qui Nhon to Pleiku in the direction of Highway 19 with a total length of 180 km, passing through the localities of Phu My, Phu Phong, An Khe mountain Pass, Mang Yang mountain Pass, Iatiem (North Highlands warehouses); to build more entrepots in Phu Phong and pumping station at the Mang Yang mountain pass in the period of 2014 to 2016.

4. The pipeline connecting depot Lach Huyen - route B12 (Bieu Nghi area)

From the depot Lach Huyen, a new pipeline connected to the pipeline B12 shall be built, the connection point is at Bieu Nghi. To estimate to build two pipelines 14" with length from Lach Huyen to Bieu Nghi about 15km.

5. The Pipeline connecting the Long Son oil refinery (Ba Ria-Vung Tau) and the general depot Nha Be PV Petrol Oil (Ho Chi Minh City)

To research and to build the pipeline system from Long Son oil refinery to Nhon Trach, Nha Be toward Highway 51 to Ba Ria; from Ba Ria following gas pipeline to the Nhon Trach (Dong Nai); crossing Nha Be river to the area of Nha Be petroleum depot of Petrolimex and PV Oil, with a length of about 68 km.

c. Uprading capacity of means of petroleum transportation by water, land, rail

To renovate, upgrade and modernize the existing transportation means by water, land and rail aiming to ensure flexibility and safety for transport of crude oil and petroleum products at each stage of planning. To exploit capacity of the domestic ships industry, auto industry for building newly the barge, lorry tankers … specilized for oil transport.

To upgrade capacity of railway transport upon the line of Hai Phong - Hanoi - Viet Tri - Lao Cai to meet demand of oil and gas supply of the provinces of Phu Tho, Yen Bai, Lao Cai, Lai Chau and re-export to Yunnan – China.

4.2.3. Development of gas and oil retail system

The provinces and cities review and supplement the planning of system to retail gasoline up to 2020, with orientation toward 2025, sending report of the planning and approval decision to the Ministry of Industry and Trade for synthesis.

The Ministry of Industry and Trade make the planning of petroleum shops system along the highway, high speed highway combination with the rest stations.

5. Demand of investment capital

The total investment capital need for the production and distribution system of petroleum for the whole planning period is 651,523 billion dong, specifically:

- Investment capital need for the production system of petroleum in the period of 2010 - 2015 is 267,876 billion dong. Investment capital need for the production system of petroleum in the period of 2016 - 2020 is 204,582 billion dong. Total investment capital need for development of production systems for the whole planning period is 472,458 billion dong.

- Capital need for fuel distribution system in the period of 2011 - 2015 is 41,187 billion dong. Capital need for fuel distribution system in the period of 2016 - 2020 is 47,466 billion dong. The total investment needs for the distribution system for the whole planning period is 88,653 billion dong.

Demands for investment capital for production and distribution systems of petroleum upon the periods are in Annex 3.

6. Policies and major solutions

6.1. Solutions

6.1.1. Solution of capital attracting and investment promotion

- To diversify forms of investment and ownership; mobilize capital from all economic sectors in society, focus on funds raised from the stock market and equitization of enterprises, sources FDI, loans, etc.... combine with the fundings of programs, investment projects and participation in domestic and abroad financial markets for the investment projects with huge capital demand.

- To strengthen the activities of management, monitoring investments, especially internal controls to improve the efficiency of investment in the oil and gas projects.

- Funds from the state budget focusing on investment in infrastructure construction, building key projects on petrochemical filtration ensure implementation of the strategic objectives of economic-social development of the country; partial support for investment in scientific research, technological innovation and training of human resources development.

- To publicize the planning, list of investment projects, encourage domestic and abroad economic sectors to invest in the field of production and processing of petroleum.

- To phase investment at each stage for the projects aiming to accelerate the schedule of investment projects, avoid spreading investment dispersing resources, causing delays.

6.1.2. Solution of ensuring material source for oil and gas production

- Crude oil material:

To make sure and balance enough crude oil exploited in the domestic mines for producing petroleum of the Dung Quat refinery, gradually develop the strategic crude oil reservation storage to ensure supply for other refineries that use imported oil.

- Material for bio-fuel oil:

The plants producing biofuels must be associated with the material areas of cassava, sugarcane and oil plants. Enterprises have appropriate policies and coordinate with local authorities in planning the material zone and sign long-term contracts with farmers to ensure sufficient material for production.

6.1.3. Solution on market of consuming oil and gas products

- Big enterprises producing and trading petrole      um, in which State enterprises are the core and key (PVN, Petrolimex) strengthen the organization and distribution centers according to the supply region all over the country.

- To set up strong links between manufacturers, importers of gasoline to consume products of the refineries. Regularly update forecasts of supply and demand balance of petroleum on the domestic market, oil prices on international markets, in the region and domestic local regions to control the market.

- To enhance the State management for the distribution network to control closely the gas and oil market, especially the issues of fuel price and quality, timely detect and strictly handle commercial fraud cases, retail in the petroleum stores and petrol speculation, accumulation at the sensitive time.

- To propose active measures to ensure fuel supply source to the mountainous areas, border and island …

6.1.4. Solution of ensuring product quality, safety and environmental protection

- To enhance communication, education and dissemination of environmental knowledge to the whole people.

- Strictly control the petrol production process from raw materials stage to the manufacturing process in the plants and sending products to consumers, the process of transportation, fuel store; strictly comply with the process and standards of environmental protection. To supplement and amend the environmental standards to suit the standards of Vietnam; to build long-term objectives on environment oriented consistent with the environmental standards of Vietnam, the region and the world.

- To apply the strict measures to ensure environmental safety for all stages of production and distribution of petrol; to encourage enterprises to invest in research and application of new solutions on reduction of environmental pollution.

6.1.5. Solution of development and human resource assurance

- To focus on training to improve qualifications of staffs, technical workers, additional training of personnel to operate the processing facilities and distribution of petroleum products for the missing and weak stages.

- To set up and perfect the system of schools training officials, engineers and technical workers to meet the development needs of the system of production and distribution of petroleum.

6.1.6. Solution on science and technology

- To promote activities of scientific research and modern, high technology applications intended to improve management effectiveness, administration, business and production and distribution of fuel; to minimize fuel wastage during the course of transportation and petrol store.

- To study, select, apply, host and develop advance technologies of foreign countries in the fields of processing, transportation and distribution of fuel. To apply new technology solutions to reduce production costs, reduce the price of petroleum products. Particularly, interest in research and application modern petrochemical technologies; manufacture equipment and materials commonly used in domestic to reduce the cost of construction of the petrochemical refinery and petroleum distribution.

- To connect between the actual production with the domestic research institutes and universities to develop and implement to research critical programs and themes, schemes in the fields of production and distribution of petroleum.

6.2. The policy mechanism

6.2.1. Policy of development of gas and oil production

- To promulgate policies to support the infrastructure outside the fence of the refineries; to prefer corporate income tax; prioritize for credit loans; to encourage foreign investment in oil refinery.

- To set up the mechanisms and policies, diversification of the investment forms, reformation of administrative procedures ... to maximize resources, improve the efficiency of investment, accelerate investment schedule for the petroleum production projects.

- To promulgate preferential policies for biofuel researching projects and to bring biofuels to consumers to exploit the available material resources in the country; to bring the program of processing and use of biological materials into a development strategy of oil and gas industry.

- To make concentrated investment in petrochemical plants; to priotize the projects with large scale and high technology. Not to encourages small-scale refinery projects. Not to permit for the projects with obsolete technology.

6.2.2. Policy of encouraging investment, development of petrol distribution system

- Regularly monitor the implementation of the Decree of the Government on petroleum business in order to detect the unsuitabilities that need to modify timely, have appropriate mechanism for fuel prices.

- The State and local authorities need to encourage the enterprises to invest (by self-balance equity of the enterprises), to build petroleum depots to meet the demand of fuel supply in each region or locality; to encourage investment in new technologies in the field of safety of fire and explosive prevention and combat and environmental sanitation.

- To prioritize land of planning to build systems of contact petrol terminal; to locate petroleum storage according to planning of coastal industrial zone for the joint exploitation of the infrastructure works such as dredging, roads, electricity and water supply ... to concentrate contact receiving terminal into large clusters in order to optimize the exploitation of technical infrastructure; to limite spread investment in the petrol terminals and mitigate the risk of losing safety on fire and explosion, environmental pollution.

- To identify petroleum pipeline system to be works of the energy infrastructure of the country, being interested by the State and the ministries, branches and received the maximum support.

- Gradually build and perfect the system of national reservation storage of petroleum products to ensure energy security of Vietnam.

- To strengthen the ability to make and use the means of transport that can be produced in domestic such as tankers, dedicated tank lorry.

- To encourage the enterprises to build a system of petrol stores with large-scale on the highway, high speed highway combined with the rest stations.

Article 2. Implementation organization

1. The Ministry of Industry and Trade

- To implement state management functions on production and distribution of petroleum, publicize "development planning of production and distribution system of petroleum products in the period of 2010 - 2020, with vision toward 2025”.

- Regularly inspect and monitor the implementation; supervise and update planning.

- To preside over and coordinate with ministries, branches and localities to solve the difficulties and problems of the projects, and perform the tasks which have been specified in the Decrees, Decisions related to production and distribution of petrol by the Prime Minister; to propose the mechanisms and policies to help development stably and sustainably oil and gas industry.

- In the short term, it should focus on directing the construction of petrochemical plants - Nghi Son, Long Son, Nam Van Phong and Vung Ro; to upgrade and expand the Dung Quat refinery; biofuels plants. To direct the preparation and put biofuels E5, E10, B5, B10 which are widely used by the approved schedule.

- To focus on directing the effective implementation of the petroleum terminal projects which are expected to invest in the planning stage.

- To direct the detailed planning and make investment projects for transport of petroleum products by pipeline from Nghi Son, Thanh Hoa to Ha Nam - Ha Noi - Hoa Binh, Long Son to Ho Chi Minh; from Quy Nhon to Pleiku, from Vung Ang - Ha Tinh to Cha Lo border gate, Quang Binh.

- To preside over the appraisal and approval of additional planning for the projects of commercial petroleum storage with capacity storage of less than 100,000 m3.

- To preside over the making of legal documents related to state management on production and distribution of petroleum.

- To preside over and coordinate with Ministries and branches in directing the Vietnam Oil and Gas Corporation, Petroleum Corporation of Vietnam and the enterprises trading petroleum to research and deploy to build the national reservation warehouses of crude oil and petroleum products; to continue directing the implementation of research projects of engineering geology, hydrologic geology conditions, physical and mechanical rock for the position expected to put the underground storages of crude oil reservation, as well as the progress of construction of these warehouse.

- To make planning of the fuel stores system along the highway, high speed highway.

2. Relevant Ministries

The Ministries of Planning and Investment, Natural Resources and Environment, Science and Technology, Finance, Transport shall perform their duties, coordinate with the Ministry of Industry and Trade to deploy specifically the measures and policies outlined in this planning.

3. People s Committees of provinces and cities under central government

- To coordinate with State management agencies and enterprises to supplement and perfect the planning of economic-social development of provinces, cities and economic zones, industrial zones with consideration of building projects of "development planning of production and distribution systems of petroleum products in the period of 2010 - 2020, with vision toward 2025". People s Committees of provinces prioritize water, ground surface funds for construction of production and distribution works of petroleum at the position where was being planned, especially land fund for building the gas and oil pipeline system.

- To organize the management and create conditions for deployment of investment projects of fuel production and distribution system in the area in accordance with approved plans. To direct the authorities to closely manage the review and investment certificate issuance of projects and ensure in compliance with the provisions of construction, investment laws.

- To make, revise and supplement planning of petrol retail system in the province, city area; to send reports to the Ministry of Industry and Trade for synthesis.

- To direct market management forces in the area to coordinate with the authorities to strengthen inspection and control of petrol market prices; to prevent speculation and ensure fuel price stability over the area.

4. The enterprises manufacturing, trading and distributing petroleum

- Strictly perform the regulations of the State in the production and trading of petroleum.

- To implement timely and effectively the projects producing and distributing petroleum, especially the petrochemical refineries - Nghi Son, Van Phong, Long Son, Vung Ro, the large contact receiving terminals, the main pipelines to ensure adequate fuel supply.

- To consolidate the system of distribution channels, especially the petroleum retail system orienting modernization, trade civilization and safety on environment.

Article 3.This Decision takes effect from the signing date.

Article 4.The Ministries, Ministerial-level agencies, Governmental agencies, People’s Committees of provinces, cities directly under the Central Government and the relevant agencies are responsible for the implementation of this Decision.