Dung moves to get Nghi Son on track

According to an announcement just released by the Government Office, Prime Minister Dung has agreed with the draft commitment proposed by the Ministry of Industry and Trade (MoIT) in September 2012 to give guarantees and issue a supportive letter to the giant project.

The Vietnamese government has also assigned the MoIT to combine with the State Bank to guideline Nghi Son Joint Venture to implement this guarantee.

The prime minister also agreed in principle to permit state-run PetroVietnam – the domestic partner of the joint venture - to be the sole buyer of the project’s products.

These confirmations from the prime minister are expected to push forward the implementation of the delayed project.

At a meeting also held last week in Hanoi, PetroVietnam’s CEO Do Van Hau confirmed that the Engineering Procurement and Construction (EPC) contract of this refinery will be signed in December this year, after long time of negotiations. Hau said the project’sfeasibility study was finished and related parties were finishing preparation works to hand over the EPC contract, which is a milestone toward the start of construction.

One year earlier, according to PetroVietnam, the total value of the EPC contract to build Nghi Son refinery would come up to more than $5 billion, the highest valued EPC contract so far in Vietnam.

International contractors involved in this EPC are also the ones that have involved in building the first oil refinery in Vietnam – Dung Quat refinery in central Quang Ngai province.

The contractors include Technip from France and Japan’s JGC.  At the end of October this year, the overseas press reported that Idemitsu Kosan, the third largest oil refinery company in Japan and also one partner in Nghi Son refinery in Vietnam, had announced it would  postpone investing in this project, due to the restructuring of its investment funding process.

However, Hau said the decision to adjust funding plans of the Japanese partner would slow down the project a bit, but did not affect the progress of the whole project.

“The Japanese firm has not stopped or withdrawn investment in the project. Only the negotiation process has slowed down a little and it does not affect anything,” Hau said.

Nghi Son refinery is developed by a joint venture between PetroVietnam with a 25.1 per cent stake, Kuwait Petroleum International with 35.1 per cent, Japan’s Idemitsu Kosan at 35.1 per cent and Mitsui Chemicals at 4.7 per cent.

The project will have a capacity of 10 million tonnes of crude oil per year, or 200,000 barrels a day, 1.5 times greater than Dung Quat oil refinery’s current capacity.