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​Vietnam’s largest fuel wholesaler wants to pull out of $7bn oil refinery project

Thursday, September 27, 2018, 10:48 GMT+7

Vietnam's top fuel importer and distributor Petrolimex has sought to walk away from a plan to develop a US$7 billion oil refinery complex in the south-central Vietnamese province of Khanh Hoa, saying it wants to focus resources on other projects.

In its report to the working group of the Government Office at a working session on Tuesday, Petrolimex asked the government for its opinion on the company’s intention of withdrawal from the Nam Van Phong oil refinery project in Khanh Hoa.

According to a development plan approved by the government in 2008, the Petrolimex-developed oil refinery will be located in Ninh Phuoc Commune, Ninh Hoa District, on an area of 300 hectares of land and 300 hectares of sea surface.

The complex was initially estimated to cost $4.4-4.8 billion, with a designed capacity of 200,000 barrels per day, equivalent to ten million tons per year.

It was expected to start in 2011 and come into operation at the end of 2013. This original schedule was never met.

In late 2014, Japanese corporation JXTG Nippon Oil & Energy (JXTG) signed a memorandum of strategic cooperation with Petrolimex, paving the way for the two sides to promote the project.

In 2016, JXTG officially became a Petrolimex strategic partner and the estimated investment for Nam Van Phong rose to somewhere between $6-7 billion. Despite this, the Vietnamese fuel wholesaler was still keen on pushing the project forward.

But two years on, Petrolimex changed its mind, saying it wants to pull out from the costly refinery plan to concentrate resources on other projects, according to its report.

The excuse did not convince Deputy Minister of Planning and Investment Nguyen Van Hieu, who believed that the main reason for the withdrawal might lie in the company’s financial capacity.

Vietnam is already home to two large oil refineries, Dung Quat and Nghi Son, so “it is not really an urgent necessity to develop another project for the purpose of ensuring energy security as before,” Hieu told Thanh Nien (Young People) newspaper.

Head of the working group of the Prime Minister Nguyen Cao Luc speaks at the working session between government and Petrolimex on September 25, 2018. Photo: VGPnews
Head of the working group of the Prime Minister Nguyen Cao Luc speaks at the working session between the government and Petrolimex on September 25, 2018. Photo: VGPnews

Petrolimex has sought preferential treatment for the development of the project from the government. Now the wholesaler has decided to withdraw from the project even before it gets the answer for the proposal from the state.

In January, Prime Minister Nguyen Xuan Phuc tasked the Ministry of Industry and Trade with considering the proposed preferential policies for Nam Van Phong, but the government has since “received no report from the trade ministry,” an official from the Government Office revealed at Tuesday’s meeting.

Meanwhile, the finance ministry agreed with Petrolimex’s proposal to stop the project, according to Deputy Minister Do Hoang Anh Tuan.  

Tuan added that his ministry also suggested ceasing the project when it was consulted by the developer during the feasibility study phase.

Foreign ownership ratio

Petrolimex also took advantage of Tuesday’s meeting to reiterate its call to be allowed to increase the foreign ownership, currently capped at 20 percent, to 49 percent.

The fuel wholesaler has repeatedly sought permission for the proposition, saying the 49 percent cap is in line with the government’s plan to attract both direct and indirect participation of foreign investors to improve the competitiveness and efficiency of the Vietnamese fuel market.

The strategic partner JX Nippon currently owns 12 percent of Petrolimex, meaning the company can only sell a maximum stake of only eight percent to other foreign investors, according to news website VnExpress.

However, the representatives from the Government Office delegation again underlined that the government disagreed with that proposal.

Deputy Prime Minister Vuong Dinh Hue once ruled that the foreign holding ceiling of Petrolimex be kept at 20 percent, “so the company should just continue to follow the request,” Deputy Minister Hieu said.

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Bao Anh / Tuoi Tre News

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