Gazprom Neft ends talks for refinery

A view of Dung Quat refinery. - Photo pve.vn

However, the state-owned oil company reported that the Russian oil company said it would consider buying the facility's shares in the future when the latter goes public.

The reason for Gazprom Neft quitting the negotiations could be that the Vietnamese government declined to accord preferential treatment for Gazprom Neft to join the expansion plan of the refinery.

In April 2015, PetroVietnam and Gazprom Neft signed a series of agreements to extend their collaboration on joint oil and gas exploration and production, one of which has allowed Gazprom Neft to have exclusive rights to negotiate with PetroVietnam on acquiring 49 per cent of Dung Quat refinery's stakes.

The documents were signed in Ha Noi in the presence of Viet Nam's Prime Minister Nguyen Tan Dung and Russian counterpart Dmitry Medvedev.

Late in August, Gazprom Neft sent a document to call on Vietnamese ministries and industries to approve preferential conditions for the company to take part in the expansion and modernization plan of the refinery.

However in November, the Ministry of Industry and Trade replied that it would not grant low tax incentives for the refinery after 2018.

Dung Quat refinery, located in the central province of Quang Ngai, is Viet Nam's first and only working refinery. Operating in 2010, it has a capacity of 6.5 million tonnes of crude oil per year, meeting between 30 per cent and 40 per cent of the country's consumption demand. It is owned and operated by Binh Son Refining and Petrochemical Co Ltd.

In December last year, Binh Son Refining announced the US$1.8 billion expansion plan to expand the capacity of the refinery to 8.5 million tonnes per year once the upgrade is completed by 2022.

Despite the steep fall in global oil prices in 2015, Dung Quat refinery posted a record revenue of almost VND95 trillion ($4.2 billion) and profit of nearly VND6 trillion ($267 million). It contributed VND20.3 trillion ($902 million) to the State Budget last year, Binh Son Refining reported.

Oil prices were reported to have lost 35 per cent of value in 2015.

In 2016, Binh Son Refining is targeting production of 5.83 million tonnes of oil, earn a total revenue of over VND82 trillion ($3.6 billion), and contribute VND15.7 trillion ($698 million) to the State Budget.