Petroleum Sector – Markable points in the Third Draft Decree on Petroleum Trading
• The domestic petroleum distribution segment is dominated by state-owned enterprises from supply to retail. Major wholesalers like PLX and OIL account for nearly 70% of the country's retail petroleum market share. Despite the emergence of electric vehicles, Vietnam's petroleum consumption is projected to grow by over 4% annually from 2024 to 2050.• The Ministry of Industry and Trade (MoIT) has released the Third Draft (June 27, 2024) of the Decree on Petroleum Trading and announced that they will submit the decree to the Government for issuance in 3Q24. Accordingly, we believe that the positive aspects of the Draft come from (1) the components of the operating price will be directly determined and announced by the MoIT, instead of being divided between the Ministry of Finance and the MoIT as before, which helps minimize intermediaries and overlapping management between authorities, and (2) the reflection of operating costs in the Regulate petroleum prices will be more reasonable based on data periodically provided by companies, as well as the fluctuation of CPI announed yearly.
• PLX and OIL stock prices have shown a positive trend since mid-May until now, largely reflecting investors’ expectations that the revised Decree could have a favorable impact on the companies. However, we believe that assessing the extent of its impact on the companies' business results will be more accurate after the MoIT officially announces the new Decree.
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