Idemitsu, partners approve $9bn Vietnam refinery


TOKYO -- Japanese refiner Idemitsu Kosan Co. and its partners have formally decided to build Vietnam's long-delayed second oil refinery, which would help meet the country's growing demand for oil products and come amid a refining boom in the region.

The joint venture partners on Tuesday signed a preliminary agreement with an international consortium to build the $9 billion Nghi Son refinery after securing part of around $5 billion in bank loans and agreeing to final terms with the Vietnamese government, Idemitsu Chief Financial Officer Kenichi Matsui told reporters Tuesday.

The 200,000-bpd Nghi Son refinery, to be built 180 kilometers south of Hanoi, will process Kuwaiti crude supplied exclusively by Kuwait Petroleum International.

Construction is expected to start in the second quarter of this year and commercial operations are expected to begin in the second quarter of 2017, Mr. Matsui said.

Idemitsu and Kuwait Petroleum each hold a 35.1% stake in the project. State-owned Vietnam Oil and Gas Group, or PetroVietnam, and Mitsui Chemicals own 25.1% and 4.7%, respectively.

The project has been delayed several times -- the final investment decision was originally scheduled for the summer of 2010 -- as the partners struggled to obtain bank financing without underwriting by the Vietnamese government. Talks progressed rapidly, however, after the government agreed in August to underwrite some of the project.

PetroVietnam will take all products from the Nghi Son joint venture at Asian market prices, Mr. Matsui said. The refinery's output is intended to meet the needs of Vietnam's domestic market, but PetroVietnam has the right to export any excess products to avoid low operating rates, he said.

Vietnam's oil demand currently totals around 350,000 bpd and is expected to grow around 8% annually in the coming years, Idemitsu said in a statement.

Nguyen Tien Dung, PetroVietnam's vice CEO, said Tuesday that the Nghi Son refinery would help ensure Vietnam's energy security. "When operational, the Nghi Son refinery and Dung Quat refinery will meet over 70% of the country's demand for oil products," he said.

The 150,000 bpd Dung Quat refinery is now Vietnam's only refinery.

PetroVietnam CEO Do Van Hau said the partners will officially sign the engineering, procurement and construction contract with the chosen consortium on Jan. 27 in Hanoi.

The consortium comprises JGC Corp., Chiyoda Corp., Technip, GS E&C and SK E&C.

Mr. Matsui said the partners had secured loans from a number of Japanese banks, including Japan Bank for International Cooperation and the Bank of Tokyo Mitsubishi UFJ.

Dow Jones Newswires

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