By VU TRONG KHANH and JACOB GRONHOLT-PEDERSEN
Vietnam said Wednesday it has agreed with foreign investors to begin construction of a long-delayed oil refinery, while also stepping up plans to build the country's first nuclear power plant jointly with its Soviet-era ally, Russia.
The projects move ahead as confidence in Vietnam's economy has been rocked amid surging inflation, corruption scandals and a banking sector threatened by bad debts, mostly to the country's vast state-owned sector.
The developing Asian nation until recently was seen as a darling among global investors, but they have increasingly turned their back on the country, whose economic growth is forecast to slow to 5.2% this year, the weakest in 13 years.
Plans to build Vietnam's second oil refinery, which comes with a price tag of between $8 billion and $10 billion, has been hampered for years due to financing issues between the Vietnamese government and the two main partners, Japan's Idemitsu Kosan and Kuwait Petroleum.
Banks had been unwilling to lend to the project without underwriting from the Vietnamese government, but talks intensified after the government agreed to help underwrite some of the project in August.
"We have completed talks and all the remaining issues have been solved," chairman Phung Dinh Thuc of state-run Vietnam Oil and Gas Group, or PetroVietnam, said Wednesday.
An Idemitsu Kosan spokesman confirmed the deal, while a spokesman at Kuwait Petroleum was not immediately able to comment.
The construction comes amid a refining boom in the Asia-Pacific region to satisfy growing demand for oil products. Asia is seen as the main driver of global growth in oil consumption in the coming years, and the region is set to receive more crude from the Middle East and Africa as demand slows in Europe and North America becomes less dependent on imports.
The new 200,000 bpd Nghi Son refinery will mainly process crude supplied by Kuwait Petroleum. Vietnam's sole Dung Quat refinery with a capacity of 130,000 bpd runs mainly on domestic crude, but has been mired by operational problems and unexpected shutdowns.
Operations at the Nghi Son refinery, which will be built 180 kilometres south of the capital Hanoi, were initially planned to begin in 2014.
Under a new plan, the partners will sign a deal with foreign contractors in December with operations slated to begin in the second quarter of 2016, Mr. Thuc said.
Idemitsu Kosan and Kuwait Petroleum each hold a 35.1% stake in the planned refinery, while PetroVietnam and Mitsui Chemicals own 25.1% and 4.7%, respectively.
Mr. Thuc declined to name the contracted companies for the project. But local media have earlier quoted him as saying a consortium comprising Japan's JGC Corp., French firm Technip, Spanish firm Technicas and PetroVietnam Construction JSC had been chosen for the project.
The Wall Street Journal (via Dow Jones Newswires)