Overcoming Challenges Amid Dual Pressure from Oil Prices and Policies

The last six months of 2024 saw crude oil prices continuously drop significantly, with a decline of around $16 per barrel between the first and fourth quarters. The crack spread between crude oil and refined petroleum products fell sharply and remained at low levels for several months. In the third quarter of 2024, BSR's gasoline crack spread dropped to below $2 per barrel, which is less than the average production cost at the Dung Quat Refinery.

Adding to the challenge, 2024 marked the first year in BSR’s 15-year history that the company no longer benefited from preferential tax policies in fuel trading, as import tax was reduced to 0% in the base price calculation. This change meant that BSR’s fuel business performance now relied entirely on the margin between crude oil and product prices, increasing pressure on production and operations.

Faced with these tough conditions, BSR proactively implemented a range of coordinated solutions. The company closely monitored and analyzed market trends to seize opportunities to purchase crude oil with lower premiums through spot contracts. This helped reduce input costs and improve production efficiency. At the same time, BSR quickly adjusted its sales strategy and optimized its product mix to enhance competitiveness in the market. The company also received strong support from Petrovietnam, suppliers, and customers to help maintain a stable supply chain.

As a result, amidst declining production from many international oil refining companies, Binh Son Refining and Petrochemical Joint Stock Company (BSR) still recorded impressive figures. Specifically, the Dung Quat Refinery set production records, with the CDU unit operating at 118% capacity, the RFCC at 110%, and the KTU at 140% of designed capacity. The total annual production reached 6.6 million tons, with consumption at 6.5 million tons - the highest in the five maintenance cycles of the plant.

Notably, on November 18, 2024, BSR completed its annual production plan with 5.7 million tons, finishing 43 days ahead of schedule. This milestone reflects the exceptional efforts of the leadership team and employees of the company.

These results demonstrate BSR’s flexible production and business management, a strong will to overcome challenges, and the company’s solid internal strength.

Not only did BSR maintain production levels, but it also quickly adjusted its product mix to better meet market demand. In 2024, the company changed the production ratio of Mogas 95 and Mogas 92 from 52%/48% to 74%/26%, closely matching domestic needs. This change also helped improve profits, as RON 95 gasoline offers a higher profit margin.

Additionally, BSR increased its efforts to test and process different types of crude oil to be more adaptable. In 2024, the company successfully processed Bunga Orkid crude oil from Malaysia and began testing Murban crude from the UAE. By expanding its crude oil options, the refinery can be more flexible in selecting supplies that fit both price and quality needs.

Beyond crude oil, BSR has also made good use of other materials like VGO, Reformate, and SR LSFO, which helped improve the refinery’s efficiency. On the product side, the company introduced two new types of polypropylene (PP) — TF4035 and BOPP F3030 — bringing the total number of new products to 12. Notably, BSR completed upgrades to its technical infrastructure and received certifications from SGS Germany GmbH for blending, producing, storing, and trading Sustainable Aviation Fuel (SAF). The company is now ready to start supplying SAF on a trial basis in 2025.

Proactively Evolving for Sustainable Growth

The year 2025 is a key turning point for BSR, marking the end of its five-year plan (2021-2025) and laying the foundation for the next five years of strategic growth. BSR’s leadership views this year as a time for "breakthroughs in investment and technology," with a strong focus on "innovation and digital transformation to elevate BSR to the next level".

Looking ahead to 2025, the business environment is expected to remain volatile, especially with the government gradually adjusting its fuel pricing mechanisms toward a market-driven approach. BSR’s guiding principle is: “Maintain and refresh, build on traditional strengths, and search for new drivers of growth.” Based on market forecasts, BSR has developed a strategy that focuses on three main priorities: diversifying raw materials, expanding markets, and enhancing management and operational capabilities.

Regarding raw materials, in addition to maximizing traditional crude oil sources, the company is actively researching and evaluating opportunities to expand its portfolio of components and intermediate materials such as VGO, condensate, LCO, T-DAO, naphtha, aromatic compounds, reformate, and residue for processing. This approach enhances BSR's production flexibility, optimizes processing operations, and ensures a better response to market demand.

On the market front, the company continues to develop its supply chain, leveraging competitive advantages and promoting collaboration within the industry to establish a robust value chain. Research and development efforts, as well as marketing activities, have been intensified, particularly focusing on new products that align with energy transition trends. At the same time, BSR will invest in upgrading its infrastructure to support business operations and explore options for expanding, leasing, or purchasing facilities and warehouses to efficiently meet storage and distribution needs.

To support flexible and stable business operations, BSR will continue to improve legal policies related to new products and new business cooperation models. The company will also focus on expanding its business resources by importing and trading permitted products like LPG and PP. This will not only help BSR diversify its product portfolio but also enhance its competitiveness in both domestic and international markets.

In the context of the government gradually adjusting regulations on gasoline and oil trading towards a more market-driven approach, the oil refining sector in Vietnam will become more flexible and competitive. BSR aims to leverage these policies to develop a business strategy that aligns with its resources and the market landscape, thereby enhancing its independence, autonomy, and resilience against instability. The company will also continue to research, propose, and advocate for supportive mechanisms for refining product manufacturers, learning from input material business models both regionally and globally to optimize production activities.

A key highlight of the 2025 strategy is to enhance management capabilities in a modern and proactive manner. BSR is intensifying the application of digital technology in market forecasting, operational data analysis, and risk management. Simultaneously, the company is focusing on training high-quality human resources through programs that combine practical experience and theory at major energy centers like Singapore.

In the face of fluctuating market conditions and increasingly unpredictable risks, BSR is prioritizing risk management as a strategic focus. The company continuously strengthens and refines its risk management regulations and processes to promptly identify and assess potential risks. This proactive approach enables BSR to develop solutions to control and mitigate negative impacts. Such efforts not only protect the company’s business interests but also ensure that annual objectives and plans are effectively achieved.

As 2024 concludes, BSR not only maintained its business operations but also gradually elevated its position by demonstrating flexibility, innovative thinking, and decisive action. The achievements made serve as a solid foundation for the company to continue to excel in 2025 and beyond.

With a clear strategic vision, a commitment to sustainable development, and a relentless spirit of innovation, BSR is asserting its leadership role in Vietnam's oil refining industry, ready to enter a new era and expand regionally in the journey toward global energy transition.

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