New Vietnamese Oil Refinery Runs into Trouble

>Nearly three years ago Vietnam’s state-run energy company, Vietnam Oil & Gas (PetroVietnam) opened the country’s first oil refinery. The plant’s capacity is about 150,000 barrels/day (or 7.5 million metric tons annually) and it meets roughly a third of the country’s domestic demand.

The country has 10 more refinery projects on the drawing board, but only one with any chance of getting financing. Vietnam had once looked at oil refining as a potential export business, where the countries refineries would send value-added products to importers like Japan and China.

That plan is probably dead now, as refining margins have narrowed and the country doesn’t have the money to build the plants on its own and potential backers are scarce. For example, the proposed Nghi Son refinery was originally estimated to cost around $7 billion for the 200,000 barrel/day plant. The cost estimate has now escalated to as much as $10 billion.

A subsidiary of Kuwait’s national oil company had offered to put up $4 billion for the new plant, and Japan’s Idemitsu Kosan Co. would also invest and bring its operational expertise to the new refinery. Another Japanese company, Mitsui, was slated as the buyer for the refined products.

But Kuwait is reconsidering its investment according to a report from MarketWatch, and without those funds the project will certainly be delayed further if not killed altogether.