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Foreign cooking gas companies feel the heat
Unlike in other sectors where local producers fear foreign competitors, in Vietnam’s cooking gas market it’s the foreign firms who are struggling to make a buck.
Foreign suppliers of liquefied petroleum gas (LPG), used by nearly every household for cooking, said the proliferation of fake gas cylinders meant there was little profit to be made in Vietnam.
BP Gas recently announced it was leaving Vietnam next month. The company, set up in 1998, said it was not making enough money in Vietnam because its gas cylinders were being stolen and refilled illegally.
Earlier this year, Exxon Mobil Unique Gas, a unit of US oil giant ExxonMobil, sold all its production facilities in Vietnam to Malaysian oil and gas company Petronas. Last year, Taiwan’s UP Gas filed for bankruptcy and exited the market.
There are now more than 70 LPG trading companies in the country and many of them are foreign giants, including Shell, Elf-Total, Petronas, Picnic and PTT.
Lai Duc Nam, managing director of Petronas Vietnam, said foreign companies had to meet safety, production and distribution standards set by both Vietnam and their own countries. As a result, their operating costs are significantly higher than Vietnamese producers, making their products more expensive, he said.
Analysts estimate the operating costs of foreign LPG producers are US$30-60 per tons higher than their local rivals.
Moreover, the trade in falsely-branded and stolen gas containers is rampant, Nam said.
Statistics from the Vietnam Association for Anti-Counterfeiting and Trademark Protection showed that 30 percent of gas cylinders in Vietnam were fake. Only half the gas companies operating in Vietnam have registered their brands or their businesses, the association said.
PV Gas General Director Nguyen Ngoc Son said the country’s gas shops were not monitored properly.
Many foreign companies said they wanted to establish their own distribution networks so they could provide better customer service and make sure their gas cylinders were not stolen by small companies. But it costs more than VND100 million ($6,000) to set up a retail shop, which most LPG suppliers find too expensive.
For companies that are able to afford the high cost, the shops would only make a profit if they sold rivals’ products.
Petronas’s Nam said LPG retailers could sell one brand only if the brand had a really large customer base but because Vietnam’s market is so segmented, no one brand has enough of a market share.
Gas companies said they can’t pressure retail shops to be sole agents or the shops will not sell their products. Moreover, as retailers do not receive commissions from gas companies, they do not need to follow any trading policies set by the companies.
“Retail LPG shops always add between VND5,000 and VND10,000 (30 to 60 cents) to the maximum retail price fixed by the supplying companies,” Nguyen Duc Thanh of the Ministry of Industry and Trade’s Competition Administrative Department told a forum in Hanoi last week.
When global LPG prices dropped, many local suppliers lowered their prices but retailers often did not, he said.
VT Gas Company Deputy Director Tran Trung Chinh called on the Ministry of Interior to approve an association of LPG suppliers to help monitor the gas trading in the country.
According to the Ministry of Industry and Trade, there are more than 5,000 LPG agents nationwide, 1,500 of which are in Ho Chi Minh City.
ThanhNien, VNA
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