VietNamNet Bridge – Japan's top oil refiner, JX Nippon Oil & Energy Corp, has unveiled plans to go ahead with refinery projects in Vietnam as it seeks to expand in overseas markets to offset shrinking domestic demand.

JX is looking at constructing and acquiring interests in refineries and operating petrol stations throughout Vietnam, in its first major downstream oil investment outside of the East Asian island nation.

Vietnam is one of the most promising locations for such ventures due to its robust economic growth outlook and openness to foreign investment, the company's president Tsutomu Sugimori has said.

Japanese domestic demand has been withering and in order to shore up sales, the company has been forced to explore new opportunities outside of Japan if it is to grow and prosper, he stressed.

Vietnam, with a population of about 90 million has been courting foreign direct investment in their downstream oil sectors and is the top global market in addition to Indonesia that JX has been evaluating.  

The Vietnam projects will not come online until 2023 at the earliest and JX would look at exporting oil products from its seven refineries in Japan to bridge the gap until then.

Late last year, Petrolimex and JX signed a memorandum of understanding (MOU) to jointly develop a 10 million-tonne/year refining and petrochemical complex at the Van Phong Economic Zone in Khanh Hoa Province.

As part of the agreement, the companies agreed to obtain a license to set up a joint venture to perform a feasibility study for the refinery project, according to the MOU.

The MOU also called for the companies to gain approval for JX to become a principal shareholder of Petrolimex through an issuance of new shares.

Legal work for the issuance of the shares and joint-venture license is scheduled to be completed by mid-2015, Petrolimex said.

In Vietnam, JX had previously been looking to team with state-owned Petrovietnam to expand the Dung Quat oil refinery, but gave up on the project last year as financial terms could not be concluded.

Meanwhile Idemitsu Kosan Co, Japan's No.2 refiner by revenue, has agreed to joint venture a US$9 billion project to raise a second refinery in Vietnam. The 200,000-bpd Nghi Son refinery and chemical complex is the first investment by a Japanese refiner outside Japan.

Last but not least, Gazprom Neft, the oil arm of Russian state-owned Gazprom and PetroVietnam has signed a series of agreements to strengthen ties between the oil and gas industries in the two nations.

As part of the agreements, Gazprom Neft will acquire a 49% stake in the Dung Quat refinery in Vietnam, according to a press release. The deal also includes steps towards broader cooperation in the energy sector by expanding oil and gas exploration and production in Vietnam.

The Russian energy giant will have exclusive rights to negotiate with PetroVietnam to acquire 49% of the shares – the foreign ownership ceiling in a Vietnamese company – in Binh Son Refining and Petrochemical Co., the refinery operator.

Plans to modernize the Dung Quat refinery will increase capacity from the existing 6.5 million tons to 8.5 million tons annually, improve the efficiency of its technological processes enabling the plant to switch over to producing Euro-5 standard motor fuels.

Gazprom Neft’s share of investment in the project will be proportionate to its share in the plant.

VOV