BSR to languish while waiting for capital for Dung Quat Refinery

Dung Quat Oil Refinery is developed at Dung Quat Economic Zone in Quang Ngai province

According to Decision No.9016/QD-DKVN issued in December 2014 by PetroVietnam, the schedule of the upgraded and expanded Dung Quat Oil Refinery project was expected to be implemented within 78 months since the investor issued the FEED document.

The environmental impact assessment report of the project was approved in February 2019. At present, the project is in the bidding phase, the second phase of the engineering, procurement and construction (EPC) contract. This contract’s dossier was issued in early November 2019 with plans to close the bid in May 2020. Besides, the land clearance has been finished.

According to the recent report by Binh Son Refining and Petrochemical Co., Ltd. (BSR), the operator of the project, as of now, it takes 56 of 78 months as initial expectation to complete the expansion, however, the construction is still behind the deadline because the investor faces massive difficulties in arranging investment capital.mobili

The project is not one of the projects guaranteed by the government, thus, BSR has completed the procedures to organise a bidding to select a consultancy to help with capital arrangement. It expects this to be completed in the first quarter of this year. Besides, the investor also builds financial plans and approaches financial organisations to mobilise investment.

The expansion of the project is expected to cost $1.8 billion, 30 per cent of which would be equity and 70 per cent would come from loans. BSR issued three capital arrangement plans, including loans from overseas, loans from local sources with the guarantee of PetroVietnam and loans from shareholders or PetroVietnam.

BSR also proposed PetroVietnam – which owns 92.12 per cent of the stake in BRS – to become the company's guarantor for both foreign and local loans. Besides, BSR required PetroVietnam to issue loans under sub-loans to support it to implement the project.

BSR in poor health

In 2019, BSR faced massive difficulties, eating into its manufacturing effectiveness. Notably, the gap between the selling price of finished products and crude oil has been narrowed. Particularly, in February and June, the selling price of gasoline was lower than that of crude oil. The difficulties are expected to be maintained this year, with the selling price of finished products and crude oil forecast to fluctuate wildly,putting further burden on enterprises.

Besides, the company has to compete Nghi Son Refinery and Petrochemical Complex which has been operating at 100 per cent of capacity, and competition from gasoline imported from markets with which Vietnam has signed free trade agreements.

This year, BSR targeted to acquire an after-tax profit of VND1.28 trillion ($55.65 million), down 41.4 per cent on-year.

On January 17, 2018, BSR succeeded in selling 242 million shares at its IPO, with the average selling price of VND23,043 ($1) apiece. However, at the transaction session on February 16, its shares were transacted at VND7,700 (33 US cents) apiece.