Bidding Opens for Vietnam's Second Oil Refinery

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Researched by Industrial Info Resources (Sugar Land, Texas)--The stakeholders of Vietnam's second oil refinery have flagged the bidding process for the project with distribution of related documents. An international tender will soon be floated to finalize the chief contractor for the venture by the third quarter of this year.

The 200,000-barrel-per-day (BBL/d) refinery complex, due to be built at Nghi Son in the Thanh Hoa province, which is close to Hanoi, will be established at an estimated investment of $8 billion. The joint venture, called Nghi Son Refining and Petrochemical Company Limited (Nghi Son, Vietnam), is constituted by Idemitsu Kosan Company Limited (TSE:5019) (Tokyo, Japan), which holds a 31.5% stake; Kuwait Petroleum International (KPI) (Salhiya, Kuwait), which holds a 35.1% stake; PetroVietnam (Hanoi), which holds a 21.5% stake; and Mitsui Chemicals Incorporated (TSE:4183) (Tokyo), which holds a 4.7% stake.

The venture, initiated in 2008 with a planned capacity of 170,000 barrels a day and an investment of $6.2 billion, was later expanded through strategic alliances to combat shrinking domestic market conditions in Japan by allowing the compatriot partners to eventually curtail domestic production with little impact. In 2008, Foster Wheeler Energy Limited (Reading, England), a subsidiary of Foster Wheeler Limited (NASDAQ:FWLT) (Clinton, New Jersey), secured the front-end engineering and design contract for the project at its original scope of operations. The value of the contract was estimated at $200 million. Process technologies for the facility, such as gas oil and kerosene desulfurization units and the residue fluidized catalytic cracking (RFCC) unit, will be supplied by Axens (Rueil-Malmaison, France).

Idemitsu Kosan expects to offset declining domestic demand by catering to growing markets, such as Cambodia and Laos, over the next couple of decades. Demand for oil products in Japan has been forecast to decline by 6% to 7% a year, while the firm expects Vietnam's demand for fuel to double by 2020, reaching 600,000 barrels per day.

PetroVietnam is likely to source funds of about $2 billion for its investments in 2011 through sale of bonds, both in the local and overseas markets, part of which would be invested in the Nghi Son refinery. Agribank Securities JS Corporation (HCM:AGR) (Hanoi), Vietnam's largest lender, is also reported to be financing the venture. PetroVietnam will begin construction of the facility by June this year. PetroVietnam already has begun pre-construction related site-leveling activities.

The refinery is set to commence full-scale commercial operations by 2013. Crude oil requirements, estimated at 10 million to 20 million tons per year, will be met by supplies from KPI, which for the first time has invested in a venture in the Asia-Pacific zone. In addition to 200,000 tons per month (47,290 barrels per day) of gasoline, the product range of the facility will comprise 317,000 tons per month (75,000 barrels per day) of diesel, 50,000 tons per month (11,823 barrels per day) of jet fuel, 400,000 tons per year of polypropylene, and 1 million tons per year of other petroleum derivatives.

Several refinery projects are in the cards in Vietnam, which is looking to completely break its dependency on imported oil variants by 2015. However, it takes a long time to get refinery projects off the ground in the country. Although the initial process of obtaining government clearance is time consuming, the subsequent steps tend to be faster. Plans are already under way for a third refinery at Long Son in the Ba Ria-Vung Tau province. The 240,000-barrel-per-day facility is expected to be brought online by 2014.

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