Project Loans Allow Vietnam to Move Ahead on 310,000 bpd Refinery Capacity

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Researched by Industrial Info Resources (Sugar Land, Texas). Although Vietnam produces 350,000 barrels per day (bpd) of crude oil, it has no significant refining capacity and imports a high percentage of oil-based products for local market consumption, which currently stands at about 12 million tons of oil and petrol products per annum and is estimated to increase to 20 million tons by 2010 driven by the country’s increasing industrial clout and the rising expectations of the population.

At the end of 2006, with the Dung Quat refinery project underway and due to be commissioned in 2009, the government committed to build a second refinery at Nghi Son district in the central province of Thanh Hoa. Another two refineries were also given consideration, which could be sited in Long Son in Ba Ria – Vung Tau in the south of the country and Quang Ninh in the north. Other provinces have joined the lobby for new refinery sites. But in terms of investment return and the optimum use of built infrastructure, the state-owned PetroVietnam, at that stage, expressed an opinion that the clustering of refineries around Dung Quat would make more investment and economic sense in the future. In February of this year, the $2.5 billion Dung Quat refinery project was provided security with the award of a $1 billion credit from the Vietnam Development Bank to PetroVietnam. Most of the loan will go to the consortium executing the E+P+C (engineering, procurement and construction) on which action started in 2005. Technip (NYSE:TKP) (Paris, France) will carry out the main E+P+C contract with JGC (Japan) and Tecnicas Reunidas (ES:TRE) (Madrid, Spain) building the crude oil and product tanks, oil pipelines and an offshore delivery system. The 140,000 bpd (6.5 million tons per annum) will meet about 33% of Vietnam’s requirementsVietnam’s requirements for gasoline, diesel fuel, fuel oil, liquefied petroleum gas and kerosene.

The prospects for the Nghi Son project are looking bright now that talks with Idemitsu Kosan are taking place on the forming of a joint venture with a total project investment cost of $5.25 billion. Reports said that the Japanese company would arrange $3.5 billion in loans, providing 71% of the project capital, with PetroVietnam holding 29%. The design capacity of the project has been raised to 170,000 bpd (8.4 million tons per annum from 7 million tons) and a feasibility study by the joint venture aspirants was completed last October.

The refinery, which is scheduled to be commissioned in 2013, has previously attracted interest from Mitsubishi (TSE:4188) (Tokyo, Japan) and Hanwha Chemical (South Korea). The refinery complex will now include the production of paraxylene instead of asphalt and PET (polyethylene terephthalate). Paraxylene is used to produce purified terephthalic acid, the main material for polyester fiber thread in the textile industry. Nghi Son would be designed to produce 2.1 million tons of gasoline per annum, 790,000 tons of kerosene and jet fuel and 500,000 tons of liquefied petroleum gas, according to the feasibility study.

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