Deputy Prime Minister Trinh Dinh Dung asked investors to prepare consumption plans for the petroleum products of the Nghi Son Oil Refinery and Petrochemical Plant in north-central Thanh Hoa province at a meeting on June 21.

He asked that the plans guarantee the interests of all parties involved: the State, the investors, and also citizens.

The meeting was held in an attempt to resolve the difficulties facing the refinery’s construction, which was aimed at ensuring national power security, creating jobs, and producing a variety of products for local industries, especially support industries.

The plant has been identified as a key project in the oil and gas industry, attracting domestic and foreign investment.

The project has received major incentives from the government, where if the common tax rate becomes lower than the preferential rate for Nghi Son, the difference will be covered by the State-run Vietnam National Oil and Gas Group (PetroVietnam).

It has also been exempted from corporate income taxes for four years from the start of operations and then pays 10 per cent for the next 70 years.

In addition, PetroVietnam has committed to purchasing its products for 15 years at a wholesale price that is equal to the import price plus the preferential import tax of 3 to 7 per cent.

As Vietnam must implement an increasing number of international commitments to reduce tariffs (leading to falling imported gasoline prices), PetroVietnam is extremely concerned about the possibility of price competition between products from Nghi Son and imports.

The group has repeatedly predicted losses when the project goes into operation and aired concerns over its financial responsibility when operating the project.

In a report sent to authorities in early 2016 it estimated that if the crude oil price rose to $75 per barrel it would spend up to $3.4 billion a year covering Nghi Son’s preferential incentives.

This would increase proportionally as the crude oil price rose.

Last April its investors, Japan’s Idemitsu Kosan Company and Kuwait Petroleum International (KPI), announced plans for the sale of oil and petroleum from Nghi Son, creating expectations about competitive output supply.

The Nghi Son project, which has total investment of around $9 billion and will have the highest production in Southeast Asia, is a joint venture between Idemitsu and KPI, who contributed 35.1 per cent each, PetroVietnam, with 25.1 per cent, and Japan’s Mitsui Chemicals, with 4.7 per cent.

The plant is expected in begin operations in 2017.

At the same time, the Binh Son Refinery and Petrochemical Company Limited (BSR) has been in the process of equitizing the Dung Quat Oil Refinery and Petrochemical Plant in central Quang Ngai province.

It has been seeking investors from Russia and the Middle East after failing to agree to terms with Russia’s Gazprom Neft.

Gazprom Neft recently announced it would pull out of negotiations because it was not satisfied with the terms proposed by BSR.