Vietnam Dung Quat refinery to hit 200,800 bpd 2017

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Dung Quat oil refinery, Vietnam's first such facility, will expand its capacity by about half to up to 200,800 barrels per day (bpd) by 2017 and import Middle Eastern and probably Venezuelan crude, a senior executive said on Monday.

The refinery will require US$1 billion to $2 billion for the capacity expansion, said Nguyen Hoai Giang, Chief Executive of Binh Son Refining and Petrochemical Co, which operates Dung Quat.

The annual capacity of the plant, built at a cost of $2.2 billion, would be expanded to 9.5-10 million tons (190,800 to 200,800 bpd) by 2017, from 6.5 million tons (130,500 bpd) now, Giang told the Reuters Global Energy and Climate Summit via a telephone interview.

The latest capacity expansion plan is bigger than the projection made in January, when Giang said the plant would be expanded to 9.2-9.3 million tons per year by end-2015 or early 2016.

"It is important that Middle East sour crude oil could be used, making up 50 percent of the refinery's capacity, instead of 100 percent sweet crude oil produced domestically and in Southeast Asia now," he said.

"Middle East sour crude oil is cheaper and will increase our refinery's efficiency."

It was unclear if the refinery would import oil from Venezuela because shipping costs would be high, given the weight of crude from the South American country and the long distance, Giang said.

Venezuelan state oil firm PDVSA said in April it hopes to extract the first 50,000 bpd from a project with Vietnamese partner PetroVietnam in the Orinoco region by the third quarter of 2012.

The companies are working in the Orinoco extra heavy crude belt's Junin 2 block, which has proven reserves of 7.5 billion barrels, PDVSA had said.

Dung Quat is also seeking foreign partners to take a 49 percent stake to fund the upgrading project and Giang said it was still in negotiations with Japanese, South Korean, Russian and Venezuelan companies.

PDVSA had said that the Venezuelan firm and PetroVietnam planned to work together on expanding the Dung Quat facility.

Rush to upgrade

Asia is seeing a boom in new refinery developments and expansions, the latest being plans by state-run Petronas PETR.UL to build a $20 billion oil and petrochemical complex to boost Malaysia's refining capacity by half.

South Korea's four refiners are competing to upgrade their facilities, India's Reliance Industries is ramping up production and Chinese refiners are likely to add around 3.7 million bpd of new capacity between 2010 and 2015.

Vietnam has traditionally exported crude oil and imported all of its refined products but Dung Quat, which came online in early 2009, and plans to build several other refineries are slowly reversing that trend.

Output from Dung Quat, along with the 200,000-bpd Nghi Son refinery, which is expected to be operational in 2014, should be able to meet 60-70 percent of domestic demand by 2015.

The Dung Quat plant has been running at 105 percent of capacity since late 2010, meeting more than 30 percent of domestic demand.

Between February 22, 2009 and December 31, 2010 it processed 8.3 million tons of crude oil into 7.2 million tons of products.

A Japanese consultancy is working on a feasibility study due in October, which will also look at the possibility to use Venezuela's crude oil, Giang added.

The plant has picked Japanese engineering firm JGC Corp as adviser.

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