The modern economy depends on man-made machines and devices. Most of these must be fueled by petroleum in order to function. Therefore, having a stable source of petroleum through trading or self-production is an important goal of each country in general and Vietnam in particular. In this article, Apolat Legal will provide Clients with legal knowledge about the necessary conditions and licenses to trade and produce petroleum in Vietnam.
1. Definition of petroleum
According to Vietnamese law, petroleum is a common name to refer to products of the technological process of distillation and processing of crude oil, waste and other materials to create products used as fuel, including gasoline, diesel fuel, kerosene, fuel oil, aviation fuel, biofuel and other products used as fuel, excluding liquefied petroleum gas and compressed natural gas1.
Thus, it can be understood that not only fossil fuels are considered “petroleum” but also include other fuels such as biofuels, renewable oil. It is only necessary to satisfy the following conditions: 1) products of the technological process of distillation and processing; 2) used as fuel; and 3) is not liquefied petroleum gas and compressed natural gas to be considered as petroleum under Vietnamese law.
2. Subjects allowed to trade and produce petroleum
Currently, the law only allows enterprises established domestically to trade and produce petroleum. The law in reality only recognizes one way that foreign investors can participate in this industry, that is to contribute capital to domestic enterprises that are trading and producing petroleum2.
3. Types of traders engaged in petroleum trading and production
Depending on the nature of operations, the law divides traders engaged in petroleum trading and production into the following categories3:
1. Main traders including main petroleum traders and main petroleum producers.
The main petroleum trader is a trader that purchases petroleum directly from a petroleum production or processing plant (or from an enterprise that is assigned the right to offtake all petroleum products of the plant in the case the petroleum plant does not directly sell finished petroleum products) or import petroleum to supply petroleum for their system, sell to other petroleum traders and export petroleum.
Enterprises that are assigned the right to offtake all petroleum products of the oil refinery plant are entitled to export and import finished petroleum products to ensure the balance of petroleum sources supplied to the main petroleum traders according to the guidelines of the Ministry of Industry and Trade.
The main petroleum producer is a trader that conducts the technological process of distillation and processing of crude oil, petroleum products, semi-finished petroleum products, waste and other materials into petroleum products.
2. Petroleum distributors are traders that buy petroleum from a main trader. In addition to the self-consumption of petroleum at its petroleum retail stores, it must also organize a system of affiliated agents or petroleum retail franchisees to retail the petroleum.
3. General petroleum trading agents are traders acting as a petroleum agent. In addition to the self-consumption of petroleum at its petroleum retail stores, it must also organize a system of affiliated agents to sell the petroleum for the main trader to receive remuneration.
4. Petroleum retail agents are traders acting as petroleum agents to retail petroleum at their retail stores for the main petroleum trader or petroleum distributor or general petroleum trading agent to receive remuneration.
5. Petroleum retail franchisees are retail traders through commercial franchising from a main petroleum trader or petroleum distributor.
Basically, the degree of freedom of operation follows the following order: Main petroleum trader > Petroleum distributor > General petroleum trading agent > Petroleum retail agent > Petroleum retail franchisee. Traders with a higher degree of operational freedom will be subject to stricter conditions and more complicated legal procedures than traders with a lower degree of operation freedom.
4. Necessary conditions and permits to trade and produce petroleum
The following table will help Clients to better understand the necessary conditions and permits for each type of trader to trade and produce petroleum.
| Main trader | Petroleum distributor | General petroleum trading agent | Petroleum retail agent | Petroleum retail franchisee | |
| Necessary permit | Certificate of eligibility to be a main petroleum trader | Certificate of eligibility to be a petroleum distributor | Certificate of eligibility to be a general petroleum trading agent | Certificate of eligibility to be a petroleum retail agent (in case there are more than one (01) petrol retail store owned or leased by the enteprise). | None |
| Operational and permit granting conditions | 1. Be an enterprise established in accordance with law.
2. Having a dedicated wharf located in Vietnam’s international port system, ensuring the reception of petroleum tankers or other means of petroleum transport with a tonnage of at least seven thousand tons (7,000 tons), belonging to the enterprise or co-owned or leased for five (05) years or more.
3. Having a warehouse for receiving imported petroleum with a capacity of at least fifteen thousand cubic meters (15,000 m3) to directly receive petroleum from petroleum tankers and other specialized petroleum transport vehicles owned by the enteprise or leased to use petroleum traders for five (05) years or more.
4. Having domestic means of transportation of petroleum owned by the enterprise or leased to use from petroleum traders for five (05) years or more.
5. Having a petroleum distribution system: having at least ten (10) petroleum retail stores owned or leased with a lease term of five (05) years or more, of which at least five (05) stores is owned by the enterprise; at least forty (40) general petroleum trading agents or petroleum retail agents or petroleum retail franchisees under the trader’s distribution system.
6. The main trader of aviation fuel is not required to have the distribution system specified in Clause 5 above, but must satisfy the following additional conditions:
– Having a means of transport and aviation fuel refueling vehicle in accordance with regulations and standards for aviation fuel products owned or leased with a lease term of five (05) years or more.
– Having receiving warehouses at the airport with equipment and facilities meeting the standards of aviation fuels owned or leased with a lease term of five (05) years or more.
– Having a qualified testing laboratory owned or leased to check the quality of aviation fuel products according to national and international standards according to current regulations. |
1. Be an enterprise established according to the provisions of law, with the Enteprise Registration Certificate having petroleum trading business lines.
2. Having a warehouse or tank with a capacity of at least two thousand cubic meters (2,000 m3), owned by the enterprise or leased to use from petroleum traders for five (05) years or more.
3. Having petroleum transport means owned by the enterprise or leased to use from petroleum traders for five (05) years or more.
4. Having a testing laboratory owned or co-owned by the enterprise, or having a service contract to hire a state agency which has a testing laboratory capable of inspecting and testing petroleum quality criteria in accordance with technical national regulation and published applicable standards.
5. Having a petroleum distribution system in the area of two (02) provinces or centrally-run cities or more, including at least five (05) petroleum retail stores owned or leased for five (05) years or more, of which at least three (03) stores are owned; at least ten (10) petroleum retail shops belonging to retail agents or petroleum retail franchisees that are granted the Certificate of eligibility of the store to retail petroleum according to the law.
6. Managers and employees directly doing business must be educated, trained and have education and training certificates in fire prevention and fighting, and environmental protection in accordance with current law. |
1. Be an enterprise established according to the provisions of law, with the Enteprise Registration Certificate having petroleum trading business lines.
2. Having a warehouse or tank with a capacity of at least two thousand cubic meters (2,000 m3), owned by the enterprise or leased to use from petroleum traders for five (05) years or more.
3. Having petroleum transport means owned by the enterprise or leased to use from petroleum traders for five (05) years or more.
4. Having a petroleum distribution system: having at least five (05) petroleum retail stores owned or leased with a lease term of five (05) years or more, of which there are at least three (03) stores owned; at least ten (10) petroleum retail stores belonging to the agents that are granted the Certificate of eligibility of the store to retail petroleum according to the law.
The distribution system of the general agent must be within the distribution system of a maintrader and be under the control of that trader.
5. Managers and employees directly doing business must be educated, trained and have education and training certificates in fire prevention and fighting, and environmental protection in accordance with current law. |
1. Be an enterprise established according to the provisions of law, with the Enteprise Registration Certificate having petroleum trading business lines.
2. Having petroleum retail stores owned or leased with a lease term of five (05) years or more and are granted Certificate of eligibility of the store to retail petroleum according to the law.
3. Managers and employees directly doing business must be educated, trained and have education and training certificates in fire prevention and fighting, and environmental protection in accordance with current law. |
1. Be an enterprise established according to the provisions of law, with the Enteprise Registration Certificate having petroleum trading business lines.
2. Having petroleum retail stores owned or leased with a lease term of five (05) years or more and are granted Certificate of eligibility of the store to retail petroleum according to the law.
3. Managers and employees directly doing business must be educated, trained and have education and training certificates in fire prevention and fighting, and environmental protection in accordance with current law. |
| Legal basis | Article 7 Decree 83/2014/ND-CP;
Clause 1 Article 1 of Decree 08/2018/ND-CP; Clauses 5 and 6 Article 1 of Decree 95/2021/ND-CP. |
Article 13 Decree 83/2014/ND-CP;
Clause 10 Article 1 of Decree 95/2021/ND-CP. |
Article 16 Decree 83/2014/ND-CP;
Clause 13 Article 1 of Decree 95/2021/ND-CP. |
Article 19 Decree 83/2014/ND-CP;
Clause 15, 16 Article 1 Decree 95/2021/ND-CP.
|
Article 22 Decree 83/2014/ND-CP;
Clause 17 Article 1 of Decree 95/2021/ND-CP. |
For each store wishing to retail petroleum, it is required to apply for a Certificate of eligibility of the store to retail petroleum and must meet the following conditions4:
- Owned or leased with a lease term of five (05) years or more of a trader being a petroleum retail agent or a general petroleum trading agent or a petroleum retail franchisee or a petroleum distributor petrol or a main petroleum trader or producer with a distribution system in accordance with the law (the trader applying for the Certificate must be named in the Certificate of of the store to retail petroleum). In case of renting a petroleum retail store, the tenant trader must have its name on the Certificate of eligibility of the store to retail petroleum.
- Designed, built and equipped with equipment in strict accordance with the provisions of the National Technical Regulations on design requirements for petroleum stations, ensuring fire prevention and fighting safety and environmental protection of the store by competent state management agency.
- Managers and employees directly doing business must be educated, trained and have education and training certificates in fire prevention and fighting, and environmental protection in accordance with current law.
The above article only provides the Client with an initial view of the necessary conditions and permits for the trading and production of petroleum. Depending on the actual operation, other laws may apply. It is best for Clients to use the consulting services of Apolat Legal for the best legal preparation.
References:
1 Clause 2 Article 1 of Decree 95/2021/ND-CP
2 Article 4 Decree 83/2014/ND-CP; Clause 4 Article 1 Decree 95/2021/ND-CP
3 Clauses 11 – 15 Article 3 Decree 83/2014/ND-CP; Clause 2 Article 1 Decree 95/2021/ND-CP
4 Article 24 Decree 83/2014/ND-CP; Clause 18, Article 1 Decree 95/2021/ND-CP
Disclaimers:
This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.
For issues related to the content or intellectual property rights of the article, please email cs@apolatlegal.vn.
Apolat Legal is a law firm in Vietnam with experience and capacity to provide consulting services related to Business and Investment. Please refer to our services Business and Investment and contact our team of lawyers in Vietnam via email info@apolatlegal.com.
