Vietnamese giants want out from billion-dollar oil refinery projects

By Nguyen Hoai   September 28, 2018 | 01:16 am PT
Vietnamese giants want out from billion-dollar oil refinery projects
Petrolimex is seeking permission from the government to pull out of Nam Van Phong refinery project. Photo by VnExpress
Cash-strapped firms are seeking to withdraw from major oil refinery projects, opening the door wider for foreign investors.

Petro retail giant Petrolimex is seeking permission from the government to pull out of a much-delayed refinery project in southern Khanh Hoa Province to "focus resources on other projects".

Deputy Minister of Planning and Investment Nguyen Van Hieu, in a meeting with the Prime Minister's working group, said he believed the main reason for the withdrawal is Petrolimex's limited financial capability.

The Nam Van Phong refinery project was first approved by the government in 2008 at an estimated cost of $4.4-4.8 billion and an annual capacity of 10 million tons of liquefied petroleum gas (LPG), gasoline (RON 92, 95 and 98), kerosene, and diesel.

The government tasked Petrolimex with preparing project and feasibility reports with a focus on the environmental impact assessment, technology, capital structure, and identification of partners.

Construction was to start in 2011 with the refinery going on stream in late 2013. 

But it has since been a story of repeated delays.

In 2014 the proposal was revived with the cost now rising to $8 billion. But by this time Vietnam had several other refinery projects including Dung Quat, Nghi Son, Vung Ro, and Long Son.

Petrolimex signed a memorandum of understanding for strategic cooperation with Japan's JX Nippon Oil & Energy Corporation, opening the door for the Japanese firm to work on the proposed refinery. 

According to the MoU, the two companies were to establish a joint firm to work on the project in mid-2015.

Despite the Japanese giant acquiring an 8 percent stake in Petrolimex and becoming its strategic investor, the project saw little progress.

Long Son’s woes

Long Son Petrochemical Complex project in the southern province of Ba Ria-Vung Tau was another billion-dollar project to suffer a similar fate.

Approved in 2008 at a cost of $3.7 billion, the project was to be jointly developed by PetroVietnam (PVN), chemical group Vinachem and Thailand's Siam Cement Group Public Company Limited (SCG).

But Vinachem pulled out due to financial difficulties and sold its stake in the project to Qatar Petroleum International (QPI) in 2012. QPI in turn withdrew in April last year and sold its shares to SCG.

In January this year it was PVN’s turn to announce a pullout, citing an inability to raise its share of the capital and the delay caused by long contractor approval procedures.

The withdrawal of state-owned corporations from the Nam Van Phong and Long Son projects enabled foreign investors to step in.

SCG acquired all of PVN's stake in the Long Son Petrochemical Complex project to raise its ownership from 71 percent to 100 percent.

SCG began construction in February, and the petrochemical complex is scheduled to become operational in 2022.

As for the Nam Van Phong project, while Petrolimex's withdrawal request has yet to be approved, ministry representatives have backed it.

Deputy Minister of Finance Do Hoang Anh Tuan said the pullout is in line with his ministry's recommendation.

The Ministry of Planning and Investment said since Vietnam already has two major oil refineries, Dung Quat and Nghi Son, a third is no longer needed to ensure the country’s energy security.

Following Petrolimex's demand, Nguyen Cao Luc, Vice Chairman of the Government Office and deputy head of the prime minister's working group, has asked the Ministry of Industry and Trade to submit a report.

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