JX Nippon turns its back on Dung Quat oil refinery

Dung Quat is the first refinery in Vietnam and commenced commercial operations in 2010 with the annual capacity of 6.5 million tonnes. Currently the refinery runs at full capacity and supplies approximately 30 per cent of the total country’s petroleum demand. The expansion phase will increase the current refinery capacity by a half, or 200,000 barrels per day.

Nguyen Hoai Giang, chairman of Binh Son Petrochemical company (Binh Son) - operator of Dung Quat refinery - confirmed  JX Nippon’s decision JX Nippon did not reveal the reason for this withdrawal, Giang said, while noting that negotiations were still at an early stage.
 
Binh Son now was continuing negotiations with other potential partners. Earlier this year, PetroVietnam - the parent corporation of Binh Son - announced  that a memorandum of understanding among PetroVietnam, Petróleos de Venezuela S.A. (PDVSA), Korea’ s SKE and JX Nippon was close to completion and expected to be signed soon. But with the withdrawal of JX Nippon, the progress figures to slow until a new partner or the remaining participants come to another arrangement.

The expansion is expected to be completed and come into commercial operation by 2018 with estimated investment of $1.5-2 billion.

So far, the pre-feasibility study of the expansion phase has been approved by the government.

The expansion is expected to enable the refinery to process crude oil imported from central eastern countries and Venezuela, while the capacity of Bach Ho oil field is reducing.

The expansion of Vietnam’s Dung Quat refinery to 10 million metric tonnes of crude a year, or 200,000 barrels a day, from the current of 6 million tonnes, is expected to make the refinery become more economical.

PDVSA and PetroVietnam have partnered on the expansion plans for Dung Quat refinery since April 2011.

One plan calls for the use of crude oil from the Orinoco Oil Belt, contributed by Petromacareo, a joint venture formed between Venezuelan state companies for extraction and upgrade of crude in the Junin area of the reservoir.

JGC, a Japanese company, in 2010 was chosen as the consultant of the project to expand Dung Quat refinery.

JGC had previously involved in a joint venture with French Technip and Spain Tecnicas Reunidas to build the existing Dung Quat refinery. Of this JGC was responsible for Residual Fluid Catalytic Converter, LPG Treater and Naptha Treater areas.

The expansion phase of Dung Quat will be built on  134 hectares next to the current refinery.
For the existing refinery, PetroVietnam is offering opportunity to buy up to 49 per cent in the project to other foreign partners.