VietNamNet Bridge - Some years ago, investors flocked to Vietnam to register petrochemistry and oil refinery projects, which raised concerns about oversupply. But things are quite different now.

According to the State’s Steering Committee on key oil & gas projects, Qatar Petroleum (QP) has withdrawn from the Long Son petrochemistry and oil refinery complex, capitalized at $4.5 billion. 

The other investors in Long Son – the Vietnam Oil and Gas Group (PetroVietnam) and Thailand’s SCG Chemicals – are negotiating with QP on the transfer of QP’s capital contribution to Long Son.

A problem is the agreement with Qatari Tasweeq on providing propane and naphtha materials to Long Son.

MOIT has asked PetroVietnam and SCG to draw up a standby plan in case they cannot reach agreement with Tasweeq.

The QP’s decision to withdraw from an oil refinery project has raised worries about the fate of other multi-billion dollar petrochemistry projects, including Nhon Hoi, capitalized at $22 billion, Vung Ro $3.2 billion and Nam Van Phong $8 billion.

The projects, licensed some years ago, have been going very slowly. Will the investors reconsider the projects and flee after they realize that offered investment incentives are no longer attractive?

An analyst commented that except Dung Quat, other licensed refineries would rely on import materials, which means they would run on crude oil to be imported from the Middle East, Africa and Latin America. 

They would have to pay high costs for import material transportation.

The second reason which may make investors reconsider their decisions is that the government would not offer the same high investment incentives to all investors like the ones offered to Dung Quat and Nghi Son projects.

The analyst cited an MOIT report as saying that with Dung Quat and Nghi Son, Vietnam now can basically control the petroleum supply. The products from the two refineries satisfy 70 percent of domestic demand, and there is no need to build more refineries.

The ministry affirmed that the other oil refinery projects to be registered will not enjoy the preferences that operational refineries can enjoy, because Vietnam, which has deeply integrated into the world, has been step by step removing the tariff barriers.

The third reason is that the estimated domestic supply of petroleum products is higher than demand. Vietnam is forecast to need 41 million tons of products by 2025, while the total supply would be 52 million tons (after the government in December 2014 approved Nhon Hoi project).

SGDT