Are there too many oil refineries in Vietnam?

Published: 12/07/2011 05:00


Vietnam has been warned that if it cannot well calculate
pluses and minuses, it may face risk when developing oil refineries, especially
when the crude oil price is on the rise, while the investment rates on oil
refineries become big.

Vietnam has been warned that if it cannot well calculate
pluses and minuses, it may face risk when developing oil refineries, especially
when the crude oil price is on the rise, while the investment rates on oil
refineries become big.

According to the Ministry of Industry and Trade, about 10 petrochemical refinery
projects with the total design capacity of 60 million tons a year have been
developed, or have been waiting for investment licenses.

Of these, the Vietnam National Oil and Gas Group (PetroVietnam) is the investor
of three big projects, including Dung Quat in Quang Ngai, Nghi Son in Thanh Hoa
and Long Son in Ba Ria-Vung Tau. The conglomerate is considering building the
fourth oil refinery in Quang Ninh. If counting on the fourth project, the total
capacity of PetroVietnam invested projects would be 40 million tons a year in

Meanwhile, other investors are moving ahead with four other projects in other
localities with the total designed capacity of over 20 million tons.

Worries persisting

To date, only the Dung Quat oil refinery has become operational with the
capacity of 6.5 million tons a year, which is expected to increase to 10 million
tons a year after the scheduled expansion. Meanwhile, other projects remain on

The Nghi Son project, a joint venture among PetroVietnam and Idemitsu (IKC),
Mitsui (MCI) and KPI, capitalized at seven billion dollars, is now under the
capital arrangement. The project is expected to be completed by 2015 which would
have the capacity of 10 million tons a year. Especially, the Kuwait partner KPI
has committed to provide crude oil to the oil refinery for its whole life.

As for the Long Son project, Vietnamese PetroVietnam is seeking partners for the
joint venture. It is estimated that the total investment capital of the oil
refinery is 10 billion dollars, while the refinery would run with the oil
sourced from Venezuela.

Meanwhile, many questions remain unanswered at other oil refinery projects. The
Can Tho 2 million ton project, developed by Vietnamese Vien Dong Trade and
Investment Corporation and the US Semtech Limited B.V.I, is an example. The join
venture got the nod from the Prime Minister in 2008 and got the investment
license in the same year.

However, the investors have later changed the project’s scale, reasoning that
they have chosen a new technology for the refinery. The land area of the project
has reduced from 250 hectares to 50 hectares, while the estimated investment
capital decreased from 538 million dollars to 350 million dollars. Especially,
the foreign partner has withdrawn from the joint venture.

The Can Tho City People’s Committee has many times extended the project.
However, to date, there has been no information about how the project will be

The Vung Ro oil refinery project in Phu Yen province has not been kicked off,
though it was licensed three years ago. Meanwhile, sources have said that the
investors – the British Technostar Management Limited and Russian Tell Oil Group
– have asked for the permission to raise the investment capital to 2.5 billion
dollars from the previous level of 1.7 billion dollars.

The Nam Van Phong petrochemical refinery complex, capitalized at two billion
dollars, registered by Petrolimex and other partners, has also not been started
yet, though the project has been expected to become operational since late 2013.

Experts have warned about the difficulties investors would have to face when
developing oil refinery projects. The crude oil prices keep rising on the world
market, while the profits from oil filtration are not high, just about 20
dollars per ton. Meanwhile, non-PetroVietnam investors will not get investment
incentives from the State.

Oil refinery capacity redundant?

Opinions still vary about how many oil refineries Vietnam should have. Some
believe that the total capacity of 60 million tons a year would much exceed the
domestic demand. It is expected that the total demand for petroleum products
would be 15-20 million tons in 2011-2015 and 27 million tons a year by 2025,
which means that the supply would be double the demand.

However, according to Tran Ngoc Toan, former Head of the Oil and Gas Institute,
the forecast demand of 27 million tons is too low, if comparing with the demand
in other countries, including China and Thailand.

With the announced oil reserves, Vietnam is listed among the countries which are
poor in oil natural resources. In general the countries choose to develop
downstream industries, using the profits from oil refineries and distribution
services to settle the problem of energy security.

Tran Thuy

Provide by Vietnam Travel

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