Joint venture to begin construction of Vietnam’s second refinery

Japanese refiner Idemitsu Kosan Co. and its partners, Kuwait Petroleum, Vietnam Oil and Gas Group (PetroVietnam) and Mitsui Chemicals Inc. have formed a joint venture that will build Vietnam’s long-delayed second oil refinery. The Nghi Son refinery, once operational, will help meet the country’s growing demand for oil products.
Amidst a refining boom in the region, the joint venture partners signed a preliminary agreement with an international consortium after securing part of the US$5 billion in bank loans. The joint venture will invest US$9 billion to build the Nghi Son refinery, Idemitsu Chief Financial Officer Kenichi Matsui told reporters.
The 200,000-barrel-a-day Nghi Son refinery will be built 180 kilometers south of Hanoi, and will process Kuwaiti crude to be exclusively supplied by Kuwait Petroleum International. Matsui said construction is expected to start in the second quarter of this year, and commercial operations are scheduled to begin in the second quarter of 2017.
Idemitsu and Kuwait Petroleum each hold a 35.1% stake in the project. PetroVietnam owns 25.1%, and Mitsui Chemicals Inc. owns 4.7%.
The project has been delayed several times because the partners were not able to secure bank financing without the underwriting of the Vietnamese government. In August last year, the government finally decided to underwrite the project.
Matsui said that PetroVietnam will purchase all the products from the Nghi Son joint venture at Asian market prices. Although the refinery’s output is meant to meet the demands of Vietnam’s domestic market, PetroVietnam will be allowed to export any excess products to avoid low operating rates.
The country’s oil demand currently totals around 350,000 barrels a day and is expected to grow by 8% annually in the coming years. “When operational, the Nghi Son refinery and Dung Quat refinery will meet over 70% of the country’s demand for oil products,” said Nguyen Tien Dung, PetroVietnam’s Vice CEO. (January 15, 2013)