Green fuel fails to ignite interest at Vietnamese gas pumps

Monday, 02 March 2015
The sole pump for E5, a biofuel product that Vietnam has tried to promote the past five years, is deserted at a gas station on Nguyen Luong Bang Street in Hanoi. 
Customers are patiently queuing in very long lines for the popular 92-RON gasoline, refusing to adopt the new product. 
The situation is not much different at other Hanoi gas stations selling the blend, with 5 percent of cassava-based ethanol. 
Despite a wide commercial launch in seven major cities nearly three months ago, and a competitive price point, the biofuel has been known and used by very few people.
And among those who bought it, some say they didn't even mean to. 
Nguyen Dinh Thinh from Dong Da District is the only customer for E5 at a station on Thai Thinh Street.
When asked why he's switching to the biofuel, Thinh is completely surprised. 
"I didn't pay attention. I chose this pump because I didn't have to line up," he says, noting that his go-to gasoline grade is still the 92-RON. 
Like Thinh, many Vietnamese do not know much about E5, so they hesitate to use it for fear of poor product quality. 
In a move to boost consumption of the biofuel, retailers early this month cut the price of E5 to VND15,350 (72 US cents) per liter.
The reduction has made the price of the blend VND320 per liter cheaper than that of 92-RON, the best-selling grade in Vietnam. 
But consumers still can't be persuaded to switch. Some say the price gap is not big enough.
“My car has been running well with 92-RON. The cost is not much higher, so I don’t have any reason to change” Trinh Van Bang from Gia Lam District says, while filling up at a station.
A representative of a gas station on Thai Thinh Street, which has two E5 pumps out of the total 12 pumps, said that the number of customers for the ethanol fuel has not much increased over the past few months.
The station, each month, sells some 100,000 cubic meters of E5, around 20 percent of total gasoline sales, he said.
While that figure may look impressive, compared to a 10 percent ratio reported at some other stations, he said it is still too low considering the government's ambitious plan to have E5 completely replacing the well-known 92-RON within a year. 
The ethanol blend has been sold in Vietnam since August 2010, but at a small number of stations.
It has been made widely available in major cities, including Hanoi, Da Nang and Ho Chi Minh City, since December.
Vietnam is encouraging consumers to use ethanol-blended gasoline as it emits fewer pollutants.
Besides, the country, which produces only 30 percent of its gasoline consumption, is expected to rely less on imports once it consumes more locally-made ethanol.
Tests by the Directorate for Standards, Metrology and Quality showed that ethanol gasoline helps reduce emissions significantly.
For example, using a blend with 10 percent ethanol can almost halve carbon emissions, compared to using 92-RON.
Lab experiments from Hanoi University of Technology confirmed that carbon emissions from vehicles using E5 are significantly lower than from those using 92-RON.
However, poor demand, together with high investment outlays, have made gasoline investors hesitate to back the product.
As of late last year, nearly 200 out of 13,000 gas stations nationwide sold ethanol gasoline, and only three out of the country's 19 fuel suppliers traded E5.
According to the Ministry of Industry and Trade, Vietnam now has seven biofuel producers.
Three of them, in the provinces of Dong Nai, Kon Tum and Quang Ngai, have kept their outputs at a moderate level. 
The other four have already halted production due to low demand.
Le Xuan Trinh, deputy director of PV Oil, a subsidiary of the state-owned PetroVietnam, said the ethanol plants could produce a total of six million cubic meters of E5 a year, equivalent to 94 percent of Vietnam's gasoline demand in 2014.
Production cost of ethanol gasoline is a little higher than that of the popular 92-RON. However, its retail price is lower, giving producer a much smaller margin or even forcing them to face losses. 
Fuel companies also don't want to invest in storage and pump systems for the new product, said Nguyen Sinh Khang, vice general director of PetroVietnam, officially known as the Vietnam Oil and Gas Group.
The cost to convert an existing pump into one that can sell E5 is estimated at up to VND400 million ($18,700), Khang said.
Industry insiders say to boost biofuel consumption, the government needs to offer financial support to fuel companies. 
Now, very few people know and use the fuel, said Phan The Rue, chairman of the Vietnam Petroleum Association.
Prime Minister Nguyen Tan Dung has recently ordered the Ministry of Finance to review tax regulations on biofuel to facilitate the switch from the popular gasoline to ethanol ones, including raising export tariffs on ethanol and cassava to keep enough supplies at home for biofuel production.
Ethanol fuel is sold in some 60 countries around the world.