Shake-up in foreign-invested refinery and petrochemical projects

LSP and NSRP are both coming along slower than intended

According to a report published by Vietnam's state-run oil and gas group PetroVietnam - the domestic partner in the central province of Thanh Hoa-based complex, NSRP may come into commercial operation in August this year, instead of the first quarter as previously planned due to delays in pilot operations. The project is co-invested by a multinational consortium featuring corporations from Kuwait, Japan.

According to the initial plan, the $9.2-billion project was to come into commercial operation in July 2017. The deadline was adjusted to the fourth quarter of 2017, but failed.

Previously, NSRP stated that as of October 24, 2017, the preparations for the pilot operation were 37 per cent finished only, thus it forecast that the complex will not start commercial operations on time.

Regarding the engineering, procurement, and construction (EPC) contract of the project, as of late October 2017, 97.78 per cent has been completed.

At present, the contractor has been co-operating with the investors to implement the test operations of the supporting system, according to the EPC contract. However, numerous technical problems have yet to be surmounted. Besides, the investors have implemented the test operations of the remaining components slowly, only finishing 42.9 per cent of the expected progress due to the slow handling of technical problems during the pilot operation.  

To date, the investors disbursed $8.008 billion, $4.278 of which comes from bank loans, $2.4 billion from equity, and $1.33 billion from other loans.  

Ambition to acquire 100 per cent in the Long Son project

Meanwhile, Thailand's SCG expressed intentions to acquire the remaining 29 per cent stake in $5.4-billion Long Son Petrochemical (LSP) to increase its holdings to 100 per cent in a document sent to Prime Minister Nguyen Xuan Phuc.

Previously, Deputy Prime Minister Trinh Dinh Dung approved PetroVietnam’s plan to divest the entire 29 per cent stake from LSP. According to PetroVietnam, the major barriers in implementing the project are the arrangement of loans and completing the procedures to approve packaging tenders.

Previously, in March 2017, SCG completed taking over 25 per cent stake in LSP from Qatar Petroleum International Vietnam (QPIV) to increase its holding in the project to 71 per cent from available 46 per cent stake.

Positioned as Vietnam’s first petrochemical complex, LSP will accommodate a flexible feedstock with olefin production capacity of 1.6 million tonnes per year.

The complex is equipped with proven processes from leading international licensors, while its business operations strictly follow international safety standards and are environmentally-friendly. LSP is scheduled to be completed and begin commercial operations in 2022.

Dung Quat’s concern about strict competition

LSP and NSRP are two of the largest of refineries in Vietnam.

Notably, LSP has a designed capacity of 1.6 million tonnes of olefins per year. Meanwhile, according to the plan, NSRP will have a total output volume of 5.3 million tonnes, including 1.7 million tonnes of liquefied petroleum gas (LPG), 1.49 million tonnes of petroleum, and 2.7 million tonnes of oil.

This massive capacity made Vietnam's first operating oil refinery Dung Quat concerned about the sales of its output under the strict competition with these above competitors. 

Additionally, the operator of Dung Quat refinery and the Quang Ngai People's Comittee complained about the tax incentives that NSRP will enjoy once it comes into operation. 

Thereby, at a meeting organised in late 2017, the representative of the Quang Ngai People’s Committee complained to the government of the unfair playground after the government approved of a 7 per cent import tariff on petroleum products and 3 per cent on petrochemical products (polypropylene and benzene) that NSRP can enjoy for ten years, excluding Dung Quat refinery.