Nghi Son refinery getting breathing space

Previously, refinery investor PetroVietnam risked being forced to reopen the engineering, procurement and construction (EPC) contract if a winning bidder could not be found before July 12.

PetroVietnam general director Phung Dinh Thuc said negotiations had taken longer than expected, because it was the biggest EPC contract to be negotiated in Vietnam’s petroleum industry.

Thuc strongly emphasised the participation of Kuwait Petroleum International, as Kuwait would provide crude oil to the refinery.

Thuc said PetroVietnam and proposed partners were parallel asking for Vietnamese government guarantee and negotiating with capital investment donors.

Thuc hoped that the refinery could start construction within 2011’s third quarter.

PetroVietnam initially planned to sign off on the EPC contract in the second quarter of this year, but failed to find a suitable partner.

It is now conducting negotiations with a consortium led by Japanese JGC Corporation, Japanese Chiyoda Corporation, French Technip SA, Korean SK Engineering and GS Engineering.

The major factor hindering the outcome was that partners were still waiting for more favourable conditions from the government, according to industry experts.

Thanh Hoa province’s $6.2 billion Nghi Son refinery will be Vietnam’s second refinery and the first with involvement of foreign partners. It is expected to go live in 2014.

PetroVietnam holds a 25.1 per cent stake in the project, while Kuwait Petroleum International has 35.1 per cent, Japan’s Idemitsu Kosan 35.1 per cent interest and Mitsui Chemicals 4.7 per cent.

When finished, the project will have a design capacity of 10 million tonnes of crude oil a year, or 200,000 barrels a day, 1.5 times more than the capacity of the existing Dung Quat oil refinery.