Petroleum project turns on the charm

Phu Yen Provincial People’s Committee is proposing an exemption on export duty for Vung Ro Petroleum’s petrochemical and sulfur-based products as incentives currently apply to another mammoth oil refinery and petrochemical complex in central Ha Tinh province, the Nghi Son Complex.

In a recent meeting with Phu Yen authorities, the prime minister asked the Ministry of Finance to collaborate with the ministries of Planning and Investment, Industry and Trade to consider a suitable tax application scheme and report to the government within May 2013.

“The project self-life is at least 30 years, so stable and long-term state policies are essential for us to appraise the project’s overall efficiency. Besides, lenders also look at the mechanism applied at the project to evaluate investment efficiency,” said a Vung Ro Petroleum executive.

Earlier, in November 2012, the Vung Ro Petroleum Company voiced a proposal for zero per cent export duty on the plant products.

However, later in Document 204/TTg-KTN the project was just approved for exemption of export duty on oil refinery products while petrochemical products would still incur 10 per cent export duty.

When sourcing approval for zero per cent export duty on its petrochemical products, Phu Yen authorities and the investor reportedly resorted to Nghi Son Complex’s Government Guarantee Underwriting (GGU) minutes. 

Accordingly, the Nghi Son Oil Refinery and Petrochemical Company got the right to export sulfur and petrochemical products at any time with zero per cent export duty.

In early February 2013, the government ratified some investment incentives for the Vung Ro Petroleum project, such as corporate income tax exemption in the first four years since generating taxable incomes and 50 per cent reduction in nine following years, exemption of import duty on crude oil, machinery, equipment and materials which could not be produced in Vietnam for the plant’s construction.

The Vung Ro Petroleum project has been green-lighted to double its capacity to eight million tonnes of crude oil per year in parallel to investment capital upward revision to over $3 billion.

As planned, Vung Ro Petroleum design would be completed in late third quarter or early fourth quarter 2013 and the Engineering-Procurement-Construction (EPC) contract might be inked right in 2013.