Foreign investors change their minds about oil refineries

A view of the Nhon Hoi Economic Zone in Central Binh Dinh province. Late June, Thailand's largest corporation, PTT Public Company Limited (PTT), postponed plans to build the US$20 billion Victory Nhon Hoi refinery and petrochemical complex in the province.

The complex would have covered 1,400 hectares in the Nhơn Hội Economic Zone and refined around 20 million tonnes of oil a year.

PTT had tied up with the world’s biggest oil producer Saudi Arabian Oil Company (Saudi Aramco) to build and operate the plant.

The main reasons the Thai investor gave for the withdrawal were uncertainty in the global oil market where crude prices have plummeted, and their unhappiness with the incentives offered by the local government.

On their part, the Bình Định authorities said they have also decided to shelve the project since the investors had failed to prove its feasibility but had taken so much time that the province had missed the opportunity to attract other investors to the economic zone.

But details of the disagreement between the two sides are not known.

Before the Nhơn Hội refinery project, in mid-June Russsia’s Gazprom Neft (GPN) had decided to pull out of negotiations to buy a stake in the operator of Việt Nam’s only oil refinery, Dung Quất.

GNP, the oil arm of top global gas producer Gazprom, had started exclusive negotiations to buy a 49 per cent stake in the Bình Sơn Refining and Petrochemical Company (BSR), the operator of Dung Quất and a subsidiary of State oil company PetroVietnam.

GNP decided to halt negotiations because the Government could not offer it the preferences it sought according a source from Reuters.

The Ministry of Industry and Trade had ruled that Dung Quất cannot continue to enjoy tax breaks after 2018, one of GNP’s demands.

But the Russian company is likely to consider buying stakes in the future when Dung Quất goes public and issues shares.

Earlier, in 2015, Qatar Petroleum International also pulled out of the $4 billion Long Sơn petrochemical project in the southern province of Bà Ria-Vũng Tàu.

Licensed in 2008, the complex was to have been built by a joint-venture between Thai Siam Cement Group, Qatar Petroleum International (QPI), and PetroVietnam.

Construction should have begun in 2014 and been completed in 2017, but was delayed due to site clearance issues.

A further obstacle arose last December when the Qatari investor announced it was pulling out due to the restructuring of its development strategy but failed to reach a deal with the other partners, leading to a serious delay.

It was recently announced that construction would begin in the fourth quarter of this year, though Qatar Petroleum’s replacement has yet to be revealed.

There seems to be a disturbing pattern in the pull-outs.

Many analysts attributed it merely to investors’ reconsideration of their investment decisions.

Whatever the reasons, others said, Việt Nam does not need more refineries since the capacity of Dung Quất and those planned to be built is enough to meet the country’s demand.