Trouble-free refineries don't exist, says oil exec

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  Oil tanks at Dung Quat, Vietnam's first oil refinery, in the central province of Quang Ngai. Photo: AFP

All oil refineries around the world have problems, not just Dung Quat, Vietnam's only refinery, Nguyen Hoai Giang, chief executive officer of Binh Son Refining and Petrochemical Co, the plant's operator, tells Vietweek.

Vietweek: The Dung Quat oil refinery shut for maintenance for nearly two months. But it closed again for repairs just a month after reopening. Why?

Nguyen Hoai Giang: The shutdown was caused by a technical fault, which arose in the initial stages of its operation. The fault was detected by our experts and engineers, and those of the [French] contractor Technip, on August 5 in the catalytic cracking unit, where the co-boiler equipment cracked and began to leak fuel during the production process.

The plant is now in the completion stage, so there are some technical issues that need to be resolved. All other things are alright after being fixed in the maintenance period, which started in May. Only this fault still exists, so the contractor wanted to shut down the plant to properly deal with it.

The technical fault is not very serious, and it was foreseen. However, the unit is important, so we decided to close the plant from August 8 to fix the fault.

The contractor will combine repairs, replacement, and improvement to equipment and technical measures to ensure that the plant will be more reliable and stable after it reopens.

The contractor has not yet officially transferred the plant to us, so it will bear the cost of fixing the fault.

You say the fault was foreseen. Why didn't you fix it when you closed the refinery for maintenance?

During the maintenance process from May 15 to July 9, experts from the contractor Technip worked with our engineers and workers to deal with many major and minor technical faults in the plant. The fault in the catalytic cracking unit was also fixed.

However, it is complicated, so it needs to be operated on a trial basis for one month. The installation and design [of the co-boiler equipment] is not optimal. It will be fixed properly this time to ensure that the refinery will operate continuously until the next maintenance scheduled in the next two or three years.

How have you been dealing with the fault?

Technip quickly sent its experts to the plant soon after the fault was detected. They have been at the construction site since last Thursday and started their work by examining the equipment and improving its design. They are working day and night.

We have had a meeting with the contractor and plan to completely fix the fault by August 17.

Do we seek any commitments from the contractor or strengthen surveillance over its work to ensure there are no more major glitches that can cause the refinery to shut down in future?

Every aspect of the refinery, simple and complicated, from the design to the installation, construction, and trial operation, has been inspected. There are regulations for inspecting step by step in each stage ­­­­- which step is tested by machines, and which one by people. Even minor aspects have to undergo a testing process. The process is to ensure the project can be completed in a relatively safe and reliable manner. However, no complex work is totally safe. Risks are unavoidable. We can ensure absolute safety and no risks only if we do nothing.

Nguyen Hoai Giang, chief executive officer of Binh Son Refining and Petrochemical Co
To have no risks, the best thing is not to build a refinery. A refinery is one of the most complicated industrial works. So we should ask how to prevent problems in refineries and deal with them in the shortest time, and in the safest and the most reliable manner, instead of how to ensure there will be no problems.

Not only Dung Quat, but also all other refineries in the world face problems. The most important thing is that refineries should be operated by experienced staff, who can spot risks and prevent them. If problems occur, the staff will quickly solve them so that the refinery will not close for small problems, and only close for the shortest time for major problems.

How does the refinery closure affect the domestic market?

If production is shut for the scheduled one week, there will be a shortage of only around 100,000 tons of petroleum products. That is a tiny volume which will not seriously affect the fuel market. I think suppliers can use their reserves of petroleum products to offset the shortage. All suppliers have reserves.

However, some suppliers who do not have much stock may now have to import more. Their imports are very small.

The crude oil which is normally processed at the refinery will be exported. The refinery outage causes a redundancy of one to two crude oil lots (300,000-600,000 barrels).

The Dung Quat refinery began commercial operation in February 2009 and is designed to meet about a third of Vietnam's fuel requirements. The refinery, with a capacity to process 130,000 barrels a day, turns crude oil into gasoline, diesel, jet fuel, and fuel oil.

The plant's owner, the state-owned oil and gas giant PetroVietnam, was, in March, looking to sell a 49 percent stake to foreign investors to raise funds to increase capacity by more than half.

Dung Quat, located in the central province of Quang Ngai, needs more than $2 billion just to expand its processing capacity by less than a third to 192,000 barrels per day, or 10.5 million tons per year.

Vietnam plans to start building its second refinery, the $7.5 billion Nghi Son, in the central province of Thanh Hoa this year. The 200,800-barrel-per-day plant will process sour Kuwaiti crude oil.

Construction of the Nghi Son plant, in which Kuwait Petroleum International and Japan's Idemitsu Kosan Co and Mitsui Chemicals Inc will own stakes, will take three to four years.

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