PVGas reduced deliveries due to supply disruption from the Middle East

On March 2, PVGas Trading Company (under Vietnam Gas Corporation) announced that a force majeure situation had arisen, which could affect the supply of liquefied petroleum gas (LPG) to customers in the Southern region.

The main reason is that the international supplier declared force majeure after the bridge collapse at Saudi Aramco’s NGL Juaymah facility on February 23, causing disruption of Propane and Butane shipments. Accordingly, all LPG batches scheduled to be delivered to Thi Vai warehouse, Diem Dien from March 10 must be temporarily suspended.

In addition, armed conflicts in the Middle East interrupted the journey of ships carrying LPG through the Strait of Hormuz. As of the afternoon of March 2, at least two large crude oil tankers (VLCCs) were hit by missiles, and many liquefied gas production facilities (NGL, LPG) were attacked, causing serious damage.

Due to safety risks, large liquefied gas carriers (VLGCs) transporting LPG from the Middle East during the period from late March to the end of April currently have no plans to deliver to PVGas Trading.

“Faced with this situation, businesses are forced to reduce the import delivery schedule until March 10 and cannot arrange the source of goods after the above date,” PVGas Trading said.

To overcome this, the business said it is working with partners to find and arrange replacement goods sources as soon as possible, with costs incurred at the most reasonable level possible. However, this unit also admitted that supply in the East Asian market is scarce, and Thailand has even activated an emergency situation and temporarily stopped petroleum exports.

The company also recommends that customers proactively balance production and business plans and agree on feasible solutions in the coming time. They will continue to update the situation and commit to working with customers to overcome this period.

On February 28, the US and Israel attacked Iran, killing Iran’s Supreme Leader Ali Khamenei. Iran quickly launched a response campaign targeting Israeli territory, as well as a series of US bases in Middle Eastern countries. Currently, Qatar stopped producing liquefied gas, Israel temporarily closed its gas field, while Saudi Arabia closed the country’s largest oil refinery because of fighting.

Not to mention, according to Mr. Tran Hoang Son, Market Strategy Director of VPBank Research, the closure of the Strait of Hormuz could greatly affect energy supply and prices. This is the world’s most important oil transport route, with about 20-22% of the total global oil supply (equivalent to 20-21 million barrels per day) passing through. Besides, a large amount of liquefied natural gas from Saudi Arabia, Iraq, UAE, Kuwait, Qatar and Iran also depends on this maritime route.

VPBankS assesses that supply could be affected by a sudden decrease if the restriction lasts for a long time (even for just a few days), which could push oil prices up. Global retail gasoline prices (including Vietnam) will increase, causing inflation and economic pressure.