Japanese petrol distributor to find network expansion difficult

Idemitsu Q8 Petroleum Co Ltd (IQ8), which has launched the first wholly foreign-owned gas station in Vietnam, may find it hard to expand its retail network across the country.



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A petrol station in Vung Tau City



IQ8, a joint venture between Japan’s Idemitsu Kosan Co Ltd and Kuwait Petroleum International Ltd. – two large investors of Nghi Son oil refinery project in the northern province of Thanh Hoa – is an exception in the domestic fuel retail market as Vietnam still does not intend to open its fuel market to foreign retailers.

Following the launch of its first gas station in Thang Long Industrial Park in Hanoi City, IQ8 plans to open more along National Highway 5 connecting Hanoi and Haiphong Port before expanding its network southward.

However, experts in the sector said it is tough for IQ8 to implement its plan as all petrol traders must satisfy stringent requirements stipulated in Decree 83/2014 of the Government on petrol and oil trading. The most essential requirement is the number of gas stations must be in line with the socio-economic development plans approved by provincial-level authorities.

In HCMC as the biggest fuel market for example, Decision 6050 by the municipal government approving the gas station system development plan allows for the opening of only 372 additional stations by 2030, mainly in outlying districts.

For instance, Cu Chi District will have an extra 53 pumping stations and Binh Chanh 51. New stations will also go up in districts 2, 12, Binh Tan, Go Vap, Can Gio, Nha Be and Hoc Mon while inner-city districts of 1, 3, 4 and 5 have no vacant land for new stations.

Therefore, foreign petroleum distributors will have to compete fiercely with local ones to open new gas stations.

In addition, pumping station development projects require large investment, some VND20 billion (US$0.88 million) for a 2,000 square-meter gas station in HCMC’s suburban areas.

Some fuel traders told the Daily that there are no longer prime sites to build gas stations while this factor is even more important than customer services and store appearance, which may be the strengths of Japanese retailers.

Good locations of gas stations and many other preferential policies have helped Vietnam National Petroleum Group (Petrolimex) secure a market share of over 50% with 2,500 gas stations across the country, exclusive of hundreds of franchised agents.

However, the group has invested heavily in the retail market by upgrading its pumping stations, changing the service behaviors of its staff, offering non-cash payment service and launching an app to help customers find the nearest gas station. Petrolimex has also sold its stake to its strategic partner JX Nippon Oil & Energy Vietnam Co Ltd, a subsidiary of JX Nippon Oil and Energy Corporation – a leading Japanese petroleum distributor, which may be a bonus point for the local retailer to improve services to attract customers.

SGT

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