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BSR to expand Dung Quat Oil Refinery

The Ministry of Industry and Trade (MOIT) has asked Binh Son Refining and Petrochemical JSC (BSR) to clarify some issues related to its project on expanding Dung Quat Oil Refinery.

MOIT said the project would help solve problems related to crude oil supply sources, the standards of products, environmental standards, production capacity, deep processing capability, and diversification of products.

With the technology described in the documents, important goals will be reached: the refinery capacity would be increased to 171,000 barrels per day. It would process many different crude oil blends, and make petrol products (RON 92, RON 95), LPG, propylene, polypropylene, jet fuel/kerosene, diesel, FO and sulfur that meet Euro V standards and the latest environmental standards.

The production line and technological equipment is used in developed countries such as the US, France, the Netherlands and Italy. The technology meets the demand and goals of the project.

However, MOIT has warned about some problems, including the capital arrangement. Under the equitization plan approved by appropriate agencies, all the stockholder equity of the project will come from BSR's annual retained earnings in the 2018-2023 period.

However, the earnings only satisfy 2.7 percent of capital demand. The profits were VND250.79 billion in 2018 (when it was equitized), and VND2.913.82 billion in 2019 and minus (-) VND2,818.84 billion in 2020. As such, after three years of switching to a joint stock company, its profit is VND345.77 billion ($15 million).

The capital arrangement for the project is still problematic.

MOIT has asked BSR to clarify the method of distributing profits and mobilizing capital for the project. 

Regarding loans, BSR needs to work carefully with financial institutions to ensure the feasibility of the loans. 

Regarding crude oil supply, MOIT asked BSR to make a thorough study on the capability of importing crude oil amid the Russia-Ukraine crisis, which has changed the supply-demand base, and the prices of the energy market in Europe and the world market in general.

In order to ensure compatible operations between the refinery and the expanded part, BSR needs to review the adjusted overall design after the expansion plan gets approval by agencies.

BSR’s report shows the implementation of the project on upgrading and expanding Dung Quat has been slow.

In the latest decision, BSR plans to increase the capacity to 171,000 barrels a day instead of 192 barrels as initially planned.

Luong Bang

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