Vietnam Agrees to Raise Capacity at Dung Quat Oil Refinery from 6.5 Million to 10 Million Tons Per Year

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Vietnamese government, through the Deputy Prime Minister Hoang Trung Hai, has agreed to a capacity increase of the Dung Quat oil refinery from the current level of 6.5 million to 10 million tons per year.

Plans for the increased capacity were developed in conjunction by state-owned oil monopoly Vietnam Oil and Gas Group, also known as PetroVietnam (Hanoi, Vietnam) and were ratified by the Ministries of Planning and Investment, Industry and Trade.

The Dung Quat refinery is Vietnam's first oil refinery and was handed over to PetroVietnam in late May this year by the construction consortium headed by Technip Group S.A. (EPA:TEC) (Paris, France). Technip will continue to provide maintenance services for the next two years.

The Dung Quat refinery, which supplies 30% of the country's total domestic demand, has a total investment capital of $3 billion and produces a range of refined products, including liquefied petroleum gas (LPG), kerosene, diesel, fuel oil, A95- and A92-grade petrol, and jet A1 fuel.

To accommodate the increased production capacity, the People's Committee of the Quang Ngai Province, where the refinery is located, has asked the government to expand the Dung Quat Economic Zone to 45,332 hectares--four times the current area--and transform the zone into an industrialized city complete with urban areas and ports.

Site-clearing for Vietnam's second oil refinery at Nghi Son, in central Than Hoa Province, is almost 95% complete, and the engineering, procurement and construction contract for the refinery is expected to be signed in early 2011, following the receipt of bids from companies from the United States, Japan, South Korea and Italy. The Nghi Son refinery is a joint venture between PetroVietnam, which holds 25.1% of the project; Kuwait's national oil company's subsidiary Kuwait Petroleum International, which holds 35.1%; Idemitsu Kosan Company Limited (TYO:5019) (Tokyo, Japan), which holds 35.1%; and Mitsui Chemicals Incorporated (TYO:4183) (Tokyo, Japan), which holds the remaining 4.7%.

The $6.2 billion Nghi Son oil refinery is scheduled to be completed in 2014 and will have a production capacity of 10 million tons of crude oil, producing about 3.7 million tons of diesel, 2.3 million tons of petrol and a significant amount of LPG.

The country's third refinery will be the $7 billion Long Son oil refinery, in southern Ba Ria-Vung Tau province. In the latest developments, Japan's largest oil company, JX Holdings (TYO:5020) (Tokyo, Japan) has indicated its willingness to work with PetroVietnam to build the refinery. If the deal proceeds, the Long Son refinery, with a planned production capacity of 10 million tons per year, could be operational by 2020.

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