The Petroleum Authority of Thailand (PTT), the investor of a giant refinery in central Vietnam, allays critics' and rivals' fears
The oil refinery of Thailand's top energy company PTT at home. Photo courtesy of the company
The Petroleum Authority of Thailand (PTT) plans to build a mega refinery and petrochemical complex in Vietnam, a move that has inspired criticism here. The following is an exclusive Vietweek interview with Sukrit Surabotsopon, Senior Executive Vice President of PTT's Petrochemicals and Refining Business Unit.
Vietweek: What do you think about the concerns and strong reactions to your mega project in Binh Dinh Province?
Sukrit Surabotsopon: We understand the concerns and even the strong reactions to our project as it has a huge investment capital. The project is huge not only for us but also for the world's refining and petrochemicals industry. It is the first time a refinery and petrochemicals unit will be built together in a complex at a single location [instead of separating the two]. So it requires an investment capital of US$27 billion. From our experience, a smaller-scaled facility for refinery and petrochemicals investment would not be able to compete with current facilities in Asia. We mean facilities in India and Singapore. They are also very large and supply refinery products to the world. Furthermore, our survey found that the province's Nhon Hoi Industrical Zone is a perfect location to build the complex instead of building refinery or petrochemicals units separately or as small-scaled facilities as suggested by local authorities. The location is far away from residential areas and is surrounded by a mountain facing the sea.
Why don't you develop the complex in Thailand instead of Vietnam?
We originally intended the project to be in Thailand. However we foresee that the project would not be effective there. Firstly, supplies of refinery and petrochemicals overpass demand in Thailand and the country has to export the products. We would have to do the same thing if we develop the project in Thailand. Secondly, the project targets the Vietnamese market. So, why don't we set up the facility in Vietnam? It will be close to our market and we will have a more competitive advantage in transportation than our rivals. Thirdly, labor costs in Vietnam are cheaper than in Thailand. And last but not least, ASEAN country members will implement an economic community, or AEC, in 2015. Under the AEC, investors will seek better places for production to enjoy lower cost. We also had that as a goal in mind when we chose to build in Vietnam.
Some critics say that you don't have enough experience in the industry to put together such a large complect?
It is correct that we don't have experience in refineries. But we've had experience in petrochemicals for decades. No experiences does not mean that we can't do it. We have outstanding refinery and petrochemicals experts to help us. We believe in our project and the support of local authorities.
Vietnam National Oil and Gas Group or PetroVietnam, one of the critics that reacted strongly to your project, said an imbalance would occur on the local market if the government allows PTT to invest in the project in Vietnam. What do you think about that reaction?
We understand the reactions from PetroVietnam. They have a long-term master plan for the country's refinery and petrochemicals industry in which they will develop their own facilities or joint-projects in different regions throughout Vietnam. A reaction from Petro Vietnam is unavoidable if a different project comes in and will be developed in a location that they want for their plan. However we can confirm that the demand for refineries and petrochemicals is huge in Vietnam and will continue to be in the future thanks to the country's annual growth of gross domestic product. Moreover our products will not compete directly with PetroVietnam, which mainly produces refinery products while we focus on petrochemicals. The complex will have a facility to produce refinery products, but not much. They will be used as inputs for other facilities to produce petrochemicals in the complex.
Some doubt your financial capacity for the project as 60 percent of the complex's investment capitals will come in the form of loans. What do you say about that?
We will have one third of the capital, another third from potential partners like materials suppliers, while the remainder will come from financial investors or investment banks. We also welcome Vietnamese partners including PetroVietnam and Vietnam National Petroleum Corporation or Petrolimex. It will not be difficult to seek loans from financial investors if you prove the project will be competitive and effective. Banks with loans will come to you as you have yet to build the project. Currently, we have a list of potential partners who are willing to join with us.
The Vietnamese government has given the green light to Thailand's top energy firm Public Company Limited (PTT) to apply for a license to build the US$27-billion oil refinery in Binh Dinh Province.
Local media said the preparation process would involve the Thai company hiring an independent consultant to assess the environmental impacts of the refinery, which will take 2,000 hectares of the province's Nhon Hoi Economic Zone.
It is expected to take another two years to choose a contractor after inviting bids. Construction is slated to start in the middle of 2016, last four years and provide first products for sale from the middle of 2020, processing 660,000 crude oil barrels a day, which would make it one of the largest in the world.
The plant will import crude oil from the Middle East, Africa, and Latin America to produce around 11 filtered oil products and ten petrochemical products.
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