Concerns giant refinery partner has cold feet

The legal representative of a $6.2 billion oil refinery in Vietnam last week denied rumours project partner Idemitsu Kosan was getting cold feet.

Foreign media last week quoted the Japanese company’s spokeswoman as saying Idemitsu Kosan was re-calculating costs for the refinery and a final investment decision due this summer had been put off until March, 2011. The delay meant operations at the Nghi Son refinery would not start as planned in December 2013, the spokeswoman said.

However, a source from the Nghi Son Refinery & Petrochemical Limited Liability Company rejected the news when asked by VIR.

“The project could be behind schedule for some months because bidders for an engineering, procurement and construction (EPC) contract have required an extension to finish bidding documents,” the source said.

Previously, the company expected the EPC contract bidding to be completed by October, 2010. However, with the new bidders’ requirements, the bidding would be delayed for a few months. It planned to issue only one EPC contract, the biggest EPC contract ever in Vietnam’s oil & gas sector.

“The bidders are from Japan, South Korea, Italy and the United States,” the source said.

Nghi Son is the country’s second oil refinery and is located in Thanh Hoa province’s Nghi Son Economic Zone. The joint venture agreement was signed in April 2008, which stated that PetroVietnam would provide 25.1 per cent of the project’s capital, the Kuwait Petroleum International would take on 35.1 per cent, Japan’s Idemitsu Kosan Ltd Co (35.1 per cent) and Japan’s Mitsui Chemicals Inc (4.7 per cent).

The project when finished will have a capacity of 10 million tonnes of crude oil per year, or 200,000 barrels a day, 1.5 times more than the Dung Quat refinery. Once operational, the refinery will annually churn out 2.3 million tonnes of petrol, 3.7 million tonnes of diesel and a significant amount of liquefied gas for domestic use.

PetroVietnam currently manages Dung Quat, Nghi Son and Long Son refinery projects. Only Dung Quat refinery is 100 per cent backed with state capital, which totals more than $3 billion. The refinery was put into operation last year and has yet to reach full capacity of 6.5 million tonnes of products per year, to meet around 30 per cent of the country’s demand.

Both Nghi Son and Long Son are calling on capital contributions by foreign investors. For the Long Son project, negotiations are still going on between PetroVietnam and some foreign partners such as Petronas, IPIC and South Korea’s GS Group.

The government has permitted the setting up of Long Son refinery in Long Son commune, Ba Ria-Vung Tau province. With an estimated investment of $7 billion, the third refinery will be able to process 10 million tonnes, or about 200,000 barrels, per day when it is put into operation after 2015.