Vietnam seeks term crude imports for Dung Quat refinery

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Vietnam is seeking to import crude from various sources for its domestic refinery to produce more diesel and free up local supply from Bach Ho and Nam Rong-Doi Moi fields for exports, industry sources said on Tuesday.

State oil company PetroVietnam inked on Monday a framework agreement with BP's joint venture in Russia, TNK-BP, to buy Russian ESPO crude oil blend.

The first cargo of 100,000 tons will load in November in the Pacific Ocean port of Kozmino, the outlet for the blend, as a part of the deal.

One source said Vietnam is looking at securing a 100,000-ton cargo of the medium-heavy sweet ESPO each month for a year under the framework deal which is being finalized.

Vietnamese officials are likely to meet TNK-BP next week to discuss details, the sources said.

"ESPO's diesel yield is quite high so there's more incentive to process ESPO," Sam Saw, a Singapore-based analyst at FACTS Global Energy said.

The move will allow better quality light sweet Bach Ho to be exported to Japan and South Korea, he said.

PV Oil, a subsidiary of the state oil group, signed in June a contract with Dung Quat to supply 300,000 tons of crude, including Ca Ngu Vang, Doi Moi and Bach Ho, by the year end.

Vietnam's crude oil exports between January and August plunged 44.2 percent from the same period last year to an estimated 5.49 million tons, or 165,600 barrels per day, the government said last month.

ESPO will be blended with local sweet grades to reduce its sulphur content, the sources said.

Vietnam's 140,000-bpd refinery can only process sweet crude.

PetroVietnam is evaluating different grades of crude oil for its Dung Quat refinery and has used light sweets such as Azeri Light and Malaysia's Miri and Kikeh, the sources said.

It has signed earlier another framework agreement with BP to buy term crude, one source said.

Negotiations are under way to finalise the grades and other contract details, he said, adding that the five-year term deal may start next year.

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