PetroVietnam faces up to troubled Ca Mau project

Deputy Prime Minister Nguyen Tan Dung asked the Ministry of Industry to work with the state oil and gas firm to redefine the project’s total capital needs, which have now rocketed by more than $100 million, mainly due to unforeseen expenses in consolidating weak site foundations, as well as the drop of the US dollar against the Euro in the past three years.
The deputy prime minister suggested PetroVietnam should complete the report by month-end to minimise delays on the already late project, which was launched in 2002 and still has not started building. Dung also asked PetroVietnam to speed up its negotiation with Technip to complete the EPC (Engineering and Procurements Contract).
According to his guidelines, if the negotiated EPC is not viable, there should be another round of bidding to choose a new contractor.
PetroVietnam recently proposed the project be relocated to Ba Ria-Vung Tau province, about 100 kilometres northeast of Ho Chi Minh City, where it is already operating the Phu My fertiliser plant.
The corporation said it would save costs if the plant was in Ba Ria-Vung Tau as the investor would have to spend less on upgrading infrastructure.
However, an official from the industry ministry, who asked not to be named, said any move was unlikely as the government wants a fertiliser producer in the southernmost province to support the development of agriculture and harness natural gas from block PM3.
The ministry said the project had been delayed for more than a year beyond a schedule that originally stipulated the fertiliser project would be finished by the end of 2005.
The EPC contractor would need at least three years to complete the plant’s construction. The Ca Mau fertiliser project, with designated production capacity of 800,000 tonnes of urea fertiliser per year, would consume 0.5 billion cubic metres of gas from Block PM3 and Cai Nuoc, where PetroVietnam and Malaysia’s Petronas each hold a 50-per cent stake.
Under a production sharing contract, Petronas is using gas from the block in the first two years from 2003 to 2005 and PetroVietnam will use gas from 2005. If the fertiliser project is delayed until after 2008, PetroVietnam will have to re-negotiate with Petronas on the gas-use contract.
The Ca Mau fertiliser plant is part of the $1.1-billion gas-urea-power complex. The complex also comprises a 271-km gas pipeline with capacity of 3.7 billion cubic metres per year and a $405-million Ca Mau power plant that is designed to use 0.9 billion cubic metres of gas to generate 720MW per year.
PetroVietnam said 70 per cent of the complex’s capital would be mobilised from loans and it would provide the remaining 30 per cent.