Developing oil refinery projects is no longer fashionable

Petrolimex’s chair Pham Van Thanh, at a meeting with the Prime Minister’s task force two weeks ago, unexpectedly asked for permission to stop implementing Nam Van Phong oil refinery project ($6 billion), saying that Petrolimex needs capital for other important projects.

The leaders of the Ministries of Finance (MOF), and Planning & Investment (MPI), who were present at the meeting, showed their sympathy.

Prior to that, Vung Ro ($3.2 billion) and Nhon Hoi ($22 billion) projects wer canceled.

Thoi Bao Kinh Te Sai Gon newspaper quoted its sources as reporting that Petrolimex amended the pre-feasibility study report about investment capital, capacity and tax incentives many times.

In late 2017, Bui Ngoc Bao, who was then president of Petrolimex, said Nam Van Phong must be offered the same investment incentives like those given to Dung Quat and Nghi Son.

Meanwhile, by January 2018, the government still had not made decision about the proposals of Petrolimex.

Analysts say that they cannot see the possibility of the government accepting the proposal. Several policies applied to Dung Quat and Nghi Son related to the oil price have stopped since 2018. 

Meanwhile, Petrolimex still has not found any foreign investor in the last 10 years.

The sources said that even Nippon Oil & Energy, the foreign strategic partner which holds 8 percent of shares in Petrolimex, is not interested in the project, even though it can get the rights to distribute products like the Japanese investor in Nghi Son, if it invests in the project.

PetroVietnam, the nation’s leading oil & gas group, in a report to the government in late 2015, estimated that the domestic petroleum supply capacity may reach 17.59 million cubic meters by the end of 2017 or early 2018, which includes 7.27 million cubic meters from Dung Quat and 9.6 million from Nghi Son, more than enough to satisfy domestic demand.

In the future, when Long Son oil refinery becomes operational, hundreds of thousands of cubic meters of petroleum products will be redundant, while manufacturers will not have the right for export.

Despite the comments about the low profitability of oil refinery projects, investors rushed to register oil refinery projects 5-6 years ago, when Vietnam began proceeding towards a petrochemical industry comprising of all phases of a production line. However, it seems that developing oil refinery projects is no longer ‘fashionable’.

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