A question mark over $9 billion refinery

By Ky Duyen   July 21, 2018 | 05:08 pm PT
A question mark over $9 billion refinery
Nghi Son Refinery, Vietnam’s second refinery plant, in the northern province of Thanh Hoa. Photo acquired by VnExpress
PetroVietnam, a principal investor in Vietnam’s largest oil refinery, said that it is finding it “almost impossible” to comply with new investment capital regulations.

It is not clear how this financial quandary will affect operations of the mega project in the coming months, but it is reported that the project’s foreign investors are waiting for the Vietnam Oil and Gas Group, known as PetroVietnam, for its final word on making its capital contribution before they release further funds.

In a letter sent to the Ministry of Industry and Trade (MoIT), PetroVietnam (PVN) said it was facing great difficulties in preparing and disbursing capital for the Nghi Son Oil Refinery in the central province of Thanh Hoa.

As a wholly state-owned enterprise, PVN must comply with the current law on the management of investment and construction costs.

The group has said that due to significant differences in investment protocol between the old and current laws, it is finding it “impossible” to make the adjustments needed.

Work began in 2008 on the Nghi Son Oil Refinery project, which has a designed capacity of 8.4 million tons of crude oil per year and a total planned investment of $6.15 billion.

A consortium comprising Kuwait Petroleum International, Idemitsu Kosan (35.1 percent stake each), PetroVietnam (25.1 percent) and Mitsui Chemicals (4.7 percent) was approved as project investors.

In 2013, the project’s cost was revised upwards to $9 billion, in addition to a chartered capital of $2.4 billion.

The project’s investors had previously committed to contribute $4.2 billion in capital, with the rest to be sourced through bank loans.

However, several legal obstacles have rendered PVN unable to cough up its remaining capital contribution for the project.

The foreign stakeholders have asked PVN to give its final decision on the adjusted costs by September. They have said that once PVN has made its contribution, the other parties will complete theirs as well, allowing the banks to disburse their loans.

PVN has sought the ministry’s assistance in solving this issue.

In response to PVN’s request, MOIT Deputy Minister Dang Hoang An said at an online meeting that it was a major and complex issue. He said that the ministry would solicit opinions from relevant ministries and agencies before coming to a decision.

The Nghi Son Refinery, located in the Nghi Son Open Economic Zone in Thanh Hoa province, will have a capacity of 200,000 barrels of crude oil per day in the first operational phase – which it is set to enter into in the coming months – equaling 10 million tons of crude oil per year.

This is almost double that of Vietnam’s first oil refinery, the Dung Quat plant in Quang Ngai province, and a 20 percent increase over its original designed capacity.

It is expected that the Nghi Son and Dung Quat refineries will together meet 80 percent of Vietnam’s fuel demand.

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