PVN and Gazprom Neft last year inked a deal paving the way for the Russian side to own 49% of BSR, a PVN unit that is running Dung Quat oil refinery in Quang Ngai Province, but the two sides have not agreed on details about BSR’s corporate value and the payment date for the acquisition.

If the deal with Gazprom Neft is concluded, PVN would let BSR go public in line with the Government’s Decree 59/2011 on restructuring of State-owned enterprises into joint stock concerns.

Nguyen Hoai Giang, chairman of BSR, told media earlier that if negotiations with Gazprom Neft lasted long but produced no results, BSR would implement its own plan.

By the end of last year, BSR had had chartered capital of VND35 trillion (US$1.6 billion) and employed 1,400 people. It was among the six biggest enterprises in Vietnam.

BSR has used crude oil extracted from Bach Ho oil field off the country’s southern coast and crude imported from the Middle East for processing at Dung Quat oil refinery.

After 13 years of construction and five years of operation, the efficiency of BSR’s investment in the refinery could not as high as expected if the capacity remains as it is now. Therefore, the Government approved a project to upgrade and expand it to achieve the annual processing capacity of 10 million tons from the current 6.5 million tons at a total cost of some US$1.82 billion.

PVN decided to sell a 49% stake of BSR to fund the expansion project which would allow BSR to meet 50% of the country’s fuel demand, instead of 30% as at present.

PVN plans to implement phase two of the project this year but there have been problems in the process of talks with Gazprom Neft. Meanwhile, if the upgrade project is delayed, PVN would find it hard to raise funds for the project. Phase two of the project is expected to finish in five to six years.

BSR has been profitable since its establishment in 2010, which has resulted mainly from a slew of Government incentives related to import tariffs, according to reports of PVN. In 2013, BSR had profit of nearly VND3 trillion.

The firm will enjoy the Government incentives until the end of 2018.    

SGT