According to Vietnamese economists, Vietnam will need 19 million tonnes of petroleum products by 2010 and the figure will rise to 31 million tons by 2020, which is equal to half of the world’s current consumption. If the aforementioned forecast is feasible and if locally-made petroleum products must satisfy domestic demand in accordance with criteria for the international strategic provision, Vietnam will need three oil refineries with an annual capacity of six million tonnes each. And if the demand is 70 million tonnes per year, six refineries should be built. Even though Vietnam will still have to import half of its total petrol consumption volume, the country needs at least three oil refineries by 2020.
How are efficiencies
Along coastal large roads, an abundance of workers rush to build huge plants, roads, residential areas and offices for Dung Quat oil refinery, which became operational in late February this year. However, its products are sold at the same import prices in the world market, which has resulted in a lot of questions because the plant just has to refine crude oil produced from the Bach Ho oilfield. The project’s Management Board’s Deputy Head Dinh Van Ngoc said that the fees to transport petrol products from the refinery to Hanoi and Ho Chi Minh City are the same as the transport from Singapore to Vietnam. The refinery has to buy crude oil from the Bach Ho oil field, which is operated by the Vietnam-Russia Oil and Gas Joint Venture (Vietsovpetro), at the same import price. Also, Vo Tien Dung, deputy head of the Dung Quat economic zone’s management board said the refinery has a capacity to serve 30 percent of the national demand or only the central highlands region at the expense of Ho Chi Minh City and Hanoi.
Mr. Dung also said that the government is responsible for developing the central region and providing local people with job opportunities instead of granting food for their present meals. He added that tax collection has risen while GDP per capita has increased to $700 in 2008 from $400 in 2006.
Even though the selling prices of petrol products produced by the Dung Quat oil refinery is not cheaper than the import rates, the plant brings economic benefits like employment opportunities, Mr Dung emphasized.
After inauguration and a trial run, works on the Dung Quat oil refinery have been continuously accomplished. According to reports by the state-owned Vietnam National Oil and Gas Group (PetroVietnam), as of June 10, of 1+4 and 2+3 bid packages of major EPC works 99.8 per cent have been completed 99.8 percent and a total of 98.4 per cent of the plant has been through a trial run. Most workshops of the plants are operational or ready for operation.
To date, the plant has produced 5,700 tonnes of diesel oil (DO), 5,300 tonnes of kerosene, and 1,132 tonnes of fuel oil (FO). The plant has pumped out to the domestic market 1,797 tonnes of DO and 3,773 tonnes of kerosene. On May 6, the plant produced the first series of qualified gasoline and on May 27 pumped out the first batch of product via shipping line.
The trial run has showed good results. Investor, consultants and contractors all had ensured important schedules of the plant in a bid to operate it at full capacity in August this year and hand over it to the management board in October this year.
Refineries after Dung Quat
The state-owned Vietnam National Oil and Gas Group (PetroVietnam) and Japanese and Kuwait partners have joined hands to build the second oil refinery in Vietnam with the total investment of $6 billion after the Dung Quat. The Nghi Son oil refining-petrochemical complex is located in Nghi Son economic zone of central Thanh Hoa province.
Once completed in 2013, the complex will be capable to refine 200,000 barrels of crude oil per day, equivalent to 10 million tonnes per annum. The Vietnamese side will own a 25.1 percent stake in the project, Kuwait Petroleum International (KPI) and Idemitsu Kosan Corp (IKC) 35.1 percent each, and Mitsui Chemical Inc 4.7 percent. The project’s Front End Engineering Design (FEED) costs $200 million.
The Kuwait side has pledged to satisfy all the plant’s crude oil of 10 million tonnes per annum in the first phase and 20 million tonnes per year in the second phase.
PetroVietnam said its participation in the Nghi Son oil refinery project is part of the strategies to develop oil and gas processing industries of the group as well as of Vietnam in a bid to ensure the national energy security as well as create foundation for the petrochemical and supporting industries.
PetroVietnam is speeding up oil exploration projects in Azerbaijan, Angeria and other areas so as to start oil production sooner than scheduled. It often takes up to nearly 10 years to complete the oil exploration and start oil production. PetroVietnam said if the negotiation period is smooth; the group will set up overseas joint ventures to actively supply crude oil for domestic demand.
PetroVietnam planned to supply 290,000 tonnes of gasoline for the domestic market in 2008 and to operate the Dung Quat oil refinery in the first quarter of 2009.
The Nghi Son oil refining-petrochemical project is the first of its kind invested by KPC/KPI in the Asian-Pacific region, as part of its strategy to invest in oil refining, petrochemical and petrol distribution projects will use crude oil from Kuwait as input materials.
While the second oil refinery is under a speedier construction effort, the third oil refinery project are luring interests by many foreign investors including Petronas of Malaysia, Abu Dhabi government-owned International Petroleum Investment Company (IPIC), Trafigura Company of Singapore, and GS Group of South Korea.
The Government Office has recently issued a document No. 4999 to disseminate the government’s Standing Committee's selection of the location for the construction of the third oil refinery. Specifically, the government agreed to select the location of Long Son in southern Ba Ria-Vung Tau to build the third oil refinery. However, investors are allowed to recommend Vung Ro area in central Phu Yen province or Doc Ham area in central Ninh Thuan province as other choices.
Regarding investment form, the government allowed the development of the third oil refinery project to be under a joint venture, wholly foreign invested or private-owned forms.
The prime minister also assigned the Ministry of Investment and Planning to coordinate with relevant agencies to appraise the third oil refinery project and to submit it to the government for consideration and approval prior to further developments.
Previously, PetroVietnam proposed to cooperate with Venezuelan partners to build the third oil refinery with a capacity of 10 million tonnes per annum to use crude oil imported from foreign countries as input materials. Around 10 years ago, Long Son was the most attractive location to develop oil refining industry in Vietnam rated by foreign investors. Meanwhile, in recent three years, many foreign investors have also been keen on the project including Shaw Stone & Webster International Inc, Gannon Group of the U.S. and Shell Group of Holland and Britain.
Kim Phuong
Vietnamese
