Foreign firms eye Vietnam's refinery stake

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Dung Quat oil refinery, Vietnam's sole such facility, is seeking to sell a 49 percent stake to foreign investors to raise funds to expand capacity, an official at the plant's operator said on Tuesday.

Three foreign firms, including Japan's Nippon Oil & Energy Corp, Petroleos de Venezuela and another from South Korea, have been in talks to buy the stake, the official said, confirming state media reports. He did not give any further details.

"The sale of (a) 49 percent stake was aimed at raising funds for investment, upgrading and expanding the plant's capacity," Chief Executive Nguyen Hoai Giang of Binh Son Refining and Petrochemical Co, which runs the $2.2-billion refinery, was quoted by the official Liberation Saigon daily as saying.

The refinery wants to expand capacity by 54 percent to 10 million tons, or 200,800 barrels per day, he said.

The stake sale would also attract other investors, he said in the report, adding that the refinery operator wished to pick a partner "as early as possible".

The 6.5-million-ton-per-year refinery is located in the central coastal province of Quang Ngai, 880 km (550 miles) south of Hanoi.

The expansion would help raise the refinery's output to meet 40-45 percent of the domestic demand for oil products annually, from 30 percent now.

Petrovietnam, the refinery's sole investor, aims to start expanding Dung Quat between this year and 2017. The expansion plan would take at least until the end of this quarter to complete, Giang told Reuters in early January.

Expansion plan

Dung Quat refinery became operational in May 2010, processing crude oil from Bach Ho field, Vietnam's main oil field. It has been expanding to use crude from other origins, such as Malaysian sweet crude oil, for production.

Last month PV Oil, Vietnam's state oil marketer, signed contracts to buy 1.2 million barrels of Brunei crude oil from Brunei Shell Petroleum, the first such import from Brunei, to feed the refinery.

Rising domestic demand for oil products, coupled with Vietnam's policy to avoid dependence on imports partly to help narrow the country's trade deficit, requires Petrovietnam to expand Dung Quat and draft two more oil refinery projects.

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Petrovietnam has asked Binh Son to ensure the expanded refinery becomes operational in 2018, the plant operator said in a statement dated March 12.

Japanese engineering firm JGC Corp is advising Binh Son on Dung Quat's expansion plan.

Even though Dung Quat has been running at full capacity, Vietnam still imported 10.65 million tons of oil products in 2011, up 11.2 percent from a year ago, government statistics show.

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