PetroVietnam Awards $114 Million Contract to Vietnamese-South Korean Consortium for Nation's Largest LPG Depot

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Researched by Industrial Info Resources (Sugar Land, Texas)--On November 30, PetroVietnam Gas Corporation (PV Gas) (Vung Tao City, Vietnam) signed a $114 million engineering, procurement, construction and commissioning (EPCC) contract with a consortium comprising PetroVietnam Construction JSC (HST:PVX) (PVX) (Hanoi, Vietnam) and engineering major Daewoo Engineering & Construction Company (SEO:047040) (DEC) (Seoul, South Korea) for the development of the Thi Vai liquefied petroleum gas (LPG) cold storage facility in Vietnam's Ba Ria-Vung Tau province. Both PV Gas and PVX are subsidiary companies of the state-operated Vietnam National Oil and Gas Group (PetroVietnam) (Hanoi).

Under the terms of the EPCC, PVX will execute about $59 million of works while DEC will execute the remaining $55 million. The consortium will execute the contract within a period of 22 months from the effective date of the contract. The scope of the contract includes designing; procuring materials and equipment; constructing and installing; and conducting trial operations for the project.

Construction on the 60,000-ton (15,000 cubic meters) capacity Thi Vai LPG depot project started in November 2009 with an investment estimate of more than $128 million. The project site is spread across a land area of 5.3 hectares in the nation's Cai Mep Industrial Zone and, when completed, the depot will be the largest of its kind in Vietnam. The other facilities included in the project are a wharf technology system for cold LPG import, and facilities for cooling, compressing, heating, pumping and unloading LPG from ships.

The purpose of setting up the new depot is to help PV Gas offer a more stable supply of LPG to the domestic market and secure the nation's energy supply. In fact, the consortium's earlier commitment to complete the project in 34 months was brought down to 22 months to expedite the stockpiling of LPG and meet the demands of PV Gas and other LPG importers in the nation.

Vietnam currently has close to 30 LPG depots that have a combined storage capacity of more than 61,000 cubic meters. Most of the depots are in the port cities of Hai Phong in the north and Da Nang in the central region; Ho Chi Minh; Can Tho in the Mekong Delta; in the oil-rich province of Ba Ria-Vung Tau; and in the province of Dong Nai in the south.

The presence of the state-owned LPG depots does not allow private trading companies to procure LPG directly from the rich markets of Australia and the Middle East, but they are forced to re-import it from Singapore and China, resulting in high retail prices. Currently, the local Dinh Co gas processing plant and the Dung Quat refinery meet 40% of the nation's LPG demand while the rest is imported. The commissioning of the 140,000-barrel-per-day Dung Quat refinery, which is Vietnam's first refinery, in 2009 helped the nation reduce its LPG import to some extent.

According to Chairman Nguyen Sy Thang of the Vietnam Gas association, rising affluence in the nation is prompting Vietnamese households to switch from coal to LPG as a cooking fuel, which is driving LPG demand significantly. The current domestic demand for LPG stands at about 1.2 million tons per year, but that is expected to increase to 1.5 million tons per year by 2015 and reach 2 million tons per year by 2020, a jump of 67% over current levels.

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