Vietnam Develops Oil Refining Industry With Gazprom Neft

October 22, 2013

Despite the comments about the low profitability of oil refinery projects, Vietnam vows to develop the petrochemical industry, VietNamNet reported on October 21. Ignoring the doubts about the financial capability to implement projects, foreign investors have been flocking to Vietnam to develop oil refineries.

The contract on the establishment of a joint venture to develop the Nghi Son oil refinery project was signed in 2008. However, the partners in the project, including Vietnamese PetroVietnam, Kuwaiti KPI, Japanese Idemitsu and Mitsui, had to wait five more years to start the construction of the main factory.

If noting that it took the involved parties two years to conduct negotiations and it will take four years to build the refinery, the investors would need 10 years to turn a project into reality.

The fame of the partners in the joint venture can serve as the guarantee for them to mobilize capital for the $9 billion project.

By June 2013, the $5 billion worth of loans had been arranged. This includes the $2.3 billion from Japanese JBIC and South Korean Kexim, and the $2.7 billion from commercial loans guaranteed by Nippon Export and Investment Insurance (NEXI).

In July 2013, an EPC contract was signed with the group of contractors headed by Japanese JGC Corporation.

As the preparatory works have been done, the most important work for the investors now is to ensure the planned construction pace of the factory

The only operational oil refinery has completed the feasibility study on enlarging the refinery to increase the production capacity from 6.5 million tons of crude oil now to 10 million tons per annum.

PetroVietnam, the investor of the project, is seeking a partner for the expansion project. Sources have said it could be Russian Gazprom Neft.

The Russian leading oil and gas group now owns 70 licenses for exploiting oil and five refineries with the capacity of 40 million tons.

The sources have said that the involved parties have been gearing up in the preparatory steps to be able to sign a cooperation contract by 2014.

Copyright: VietNamNet, 2013