Characteristics of Some Major Crude Oil Export Markets of Vietnam

will also no longer be able to maintain its monopoly position. This means that oil exports will also decrease, and the expectations of oil exporting countries will also gradually decrease.

 Third , the challenge when Vietnam is outside the oil alliances. We also know that the regulation of supply and demand in the oil market is decided by these alliances. The dominance of OPEC, OAPEC... organizations is even greater when oil is increasingly scarce. OPEC's production is an extremely important factor in increasing and decreasing prices in the oil market. Vietnam is an exporting country with a small market and narrow scale, so being proactive in planning for the export market also faces many difficulties. Fluctuations in many directions of the world oil market will cause many obstacles for small exporting countries like Vietnam.

Fourth, Vietnam’s oil export market is facing obstacles. Fierce competition from exporting countries in the region, oils such as Dubai, Minas, Tapis…. all have quite high competitiveness thanks to brand promotion activities, low transportation costs. These are also types of oil that have the same consumption market as our oil and occupy overwhelming market shares in markets such as Australia, Japan, China…

2.2.2. Characteristics of some major crude oil export markets of Vietnam

Vietnam's crude oil has been exported to world markets since 1987, and we have now established good relationships with our oil import markets. Currently, we have a list of traditional customers and emerging potential customers, with rapidly increasing turnover. By the end of December 2008, Vietnam's crude oil was mainly exported to the Australian markets: 4.16 million tons, down 19.6%; Japan: 2.95 million tons, up 72.4%; Singapore: 2.06 million tons, down 29.5%; the United States:

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Period: 1.46 million tons, down 1%; Malaysia: 0.853 million tons, up 2.7%; China: 0.604 million tons, up 60.6% over the same period in 2007.

The following is a brief introduction to Vietnam's main crude oil export markets:

2.2.2.1. Australian market

In fact, in recent years, Australia has been one of the leading consumers of Vietnamese crude oil. According to statistics from the Australian Petroleum Institute, Vietnam is Australia's largest oil exporter with over 100,000 barrels/day. However, there are no Australian customers who directly buy Vietnamese crude oil. This is because most of Australia's oil refineries belong to transnational corporations (TNCs) such as BP, Chevron, Texas, Exxon, Shell, etc. These TNCs are the traditional customers who buy Vietnamese crude oil and bring it back to Australia for the refineries here.

From this, it is necessary to have a complete and detailed information system in market and customer research to promptly distinguish the nationality of import customers and the actual consuming country in order to develop more dynamic and correct market strategies.

In the future, the Australian market is still identified as the largest target export market for Vietnamese crude oil and appropriate policies are needed to consolidate and stabilize this market in the long term. More specifically, it is necessary to have good contacts and relationships with the Australian oil refinery system to promptly build a direct export channel.

2.2.2.2. Japanese market

Before 1993, when the US embargo on Vietnam was still in place, our oil exports to the Japanese market accounted for 80%. It is understandable because this was the period when Japan's economy was developing at a rapid pace.

Overheating, the demand for oil increased rapidly. Moreover, due to the favorable geographical location and the suitability of Vietnamese oil for Japanese industries.

After 1993, the structure of Vietnam's export market also changed a lot. Japan is still the market with a high market share in the market structure. But the market share has decreased significantly, up to now, Japan only accounts for about 20% of Vietnam's export market structure. However, Japan is still considered a particularly important traditional market of Vietnam because the amount of Japanese imports from Vietnam is still high and Vietnamese oil always has an advantage over oil from other countries in the Japanese consumption market.

Japan imports crude oil from Vietnam to supply mainly to thermal power plants. This demand often contains many factors that cause sudden price fluctuations due to the influence of climate, weather, technical conditions of other power sources, and large number of customers. A notable feature is that these oil-fired thermal power plants do not buy crude oil directly from exporters but from Japanese trading companies, because these companies are quite flexible in adjusting supply. Therefore, when determining the export market strategy, there needs to be dynamic adjustments in price and export policies. Currently, Japan is identified as Vietnam's second largest oil consuming market, after Australia.

2.2.2.3. Singapore market

The beautiful island nation and adjacent to the Vietnamese oil and gas continental shelf has now become a major regional oil refining center, with the highest GDP per capita among the NICs in Asia, a relatively stable socio-political situation and a clean and beautiful environment. Singapore's oil refineries are currently owned by multinational oil companies such as Shell, BP, Exxon, Chevron, Texaco, etc.

Therefore, Singapore is a fairly stable crude oil consumption market of Vietnam. With the geographical advantage of the market at its doorstep, Singapore in the coming years will continue to be an important target export market of Vietnam, a reliable partner in stable and effective crude oil export activities.

2.2.2.4. US market

The United States accounts for only about 5% of the world's population but consumes about 25% of the world's oil. The figure of 20.69 million barrels/day as of 2007 and production is only one-third of the consumption, making the United States the world's largest oil importer.

It can be seen that, although the US is the world's largest importer, it also controls the import markets, which mainly supply the US with its oil needs. Any ups and downs in US consumption output affect the world oil market.

For Vietnam's exports in general and crude oil exports in particular, the US is still a large market and a country with a high growth rate. Despite major fluctuations in the world market in recent times, Vietnam's crude oil exports to the US are quite stable because we have built good relationships with US oil corporations as well as the good quality of Vietnam's crude oil, creating prestige with customers.

It should be added that in the crude oil export partner system, both forward and horizontal integration strategies can be applied simultaneously. The forward integration strategy is to build stable customers but needs to focus on customers with large refineries. According to this strategy, it is possible to commit to long-term export volumes, usually longer than 1 year as at present.

Horizontal integration strategies often require the active participation of the ASEAN Petroleum Committee, which currently meets annually to link products with crude oil distribution of the ASEAN member states.

ASEAN countries. However, this Committee is only limited to supporting the exchange of crude oil and oil products between ASEAN national oil companies, and there is no deep connection in exploration, exploitation and pricing activities. Therefore, as a member country, Vietnam needs to propose expanding the scope of activities of this Committee.

2.2.3. Marketing strategy in crude oil import and export of Vietnam

2.2.3.1. Main content of Marketing strategy in crude oil import and export

a) Product strategy

With the distinct characteristics of crude oil products such as: limited supply, demand tends to increase rapidly; export must go hand in hand with ensuring energy security; saving this rare "black gold" source, therefore, Vietnam's product strategy needs to focus on brand building and exploitation, not just for the immediate future but also for the long term. Vietnam's oil reserves are small and very limited, but in return, the quality of the products is highly appreciated and has quite strong competitiveness in the market.

Regarding export quantity, although the purpose of crude oil export is to accumulate capital for the country's industrialization, it still adheres to the following principles:

- Ensure reasonable export quantity, not as much as possible.

- Export volume will gradually decrease until 2020, when Vietnam will shift from a country exporting crude oil and importing finished petroleum products to a country that is self-sufficient in domestic consumption of finished petroleum products, moving towards exporting petroleum, exporting crude oil only has commercial significance to increase crude oil imports for the country.

- Save rare, non-renewable energy sources to serve the country's oil and gas industry in the long term.

- Ensuring optimal efficiency of import and export activities in the trend of globalization and integration.

b) Pricing strategy

Because crude oil is a rather special commodity, and Vietnam's crude oil production is not enough to put pressure on the market, Vietnam's pricing policy is based on customer perception and competitive response. Up to now, all types of Vietnamese crude oil have applied a unified price for all consumption markets without applying a pricing policy based on market segments.

Since the beginning of crude oil exports, Vietnam has chosen to apply the price formula linking other standard oils in the region. This is the form that the majority of oil producing and exporting countries apply and is increasingly dominant in the world oil and gas trade. In the market, Vietnam's crude oil exports are sold under two types of prices: the price of long-term contracts applied for a period of 6 months. Long-term oil buyers are large customers with prestige, strong financial capacity and ensure oil consumption according to the committed volume and price while accurately implementing the agreed oil delivery schedule. Long-term oil prices often take into account market fluctuations according to analysis at the time of negotiation. However, long-term prices are also strongly affected by price fluctuations in the previous 6 months and the market situation at the time of negotiation.

According to the formula, Vietnam's crude oil price policy develops as follows:

 Period 1991-1997: Vietnam crude oil price was applied according to the formula: Vietnam crude oil price = average Minas crude oil price in 3 weeks + a

in there:

- Minas crude oil prices are referenced from Hong Kong APPI price announcements for the week before delivery week, delivery week and the week after delivery week.

- The adjustment coefficient a is approved by the Government every 6 months based on the negotiation results between Vietnam Oil and Gas Group and customers.

The above formula has the advantage of being based on two Minas benchmark oils, which are highly consumed in the region and have relatively stable prices. However, at this stage, only the Hong Kong APPI price announcement source is used as the source for announcing Asian oil prices, so it does not keep up with fluctuations in the world crude oil market.

 Period 1997 - present: due to the many types of Vietnamese crude oil with different technical characteristics, many types of formulas are applied.

 For Bach Ho crude oil, Dai Hung applies the formula:

Crude oil price = 3-week average of Minas crude oil price + a where:

- Minas crude oil prices are referenced 50% from Hong Kong APPI price announcement source and 50% from Platt's price announcement source in the week before delivery week, delivery week and the week after delivery week.

- The adjustment coefficient a is approved by the Oil and Gas Corporation every 6 months for long-term contracts and for each oil lot for spot contracts based on the negotiation results of the Oil and Gas Trading Corporation with customers.

 For Bunga Kekwa oils, countries apply the formula:

Crude oil price = 50% of the average 3-week Tapis crude oil price + a where:

- Tapis crude oil prices are referenced 50% from Hong Kong's APPI price announcement source and 50% from Platt's price announcement source in the week before delivery week, delivery week and the week after delivery week.

- The adjustment coefficient a is approved by the Oil and Gas Group for each shipment based on the negotiation results of the Oil and Gas Trading Corporation with the customer.

 For Rang Dong crude oil, Ruby applies the formula:

Crude oil price = 3-week average of Minas crude oil price + a where:

- The adjustment coefficient is approved by the Joint Oil Sales Committee, consisting of representatives of the parties participating in the project, every 6 months for long-term contracts and for each oil lot for spot contracts based on the negotiation results of the Oil and Gas Trading Corporation with customers.

The above formulas have the advantage of being based on a benchmark oil type that is a type of oil with high consumption in the region and has a fairly stable price. At this stage, the Hong Kong APPI reference price announcement source only accounts for 50% and the remaining 50% is referenced on the basis of the Platt's price announcement source, which is the source of announcing prices of all types of oil in the world and taking into account the interaction of speculative factors in different market areas, so it is more beneficial.

Currently, depending on the form of cooperation in crude oil production, there are different forms of price management and operation.

 For Bach Ho, Rong and Dai Hung crude oil:

The Board of Directors of the Vietnam Oil and Gas Group is the agency authorized by the Prime Minister to decide on the export price of Bach Ho, Rong, and Dai Hung crude oil. The price management mechanism is implemented as follows:

B1: Based on the production plan approved by the Joint Venture Enterprise Council, Vietsovpetro Oil and Gas Joint Venture Enterprise will conduct oil exploitation according to the plan and report periodically to the Corporation.

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