Colossal oil refinery hungry for more capital
Colossal oil refinery hungry for more capital
Domestic and foreign investors of the Nghi Son oil refinery and petrochemical complex may have to raise their investment capital in the country’s second oil refinery project by at least $200 million to complete construction.
According to its current investment certificate, the Nghi Son complex in the central province of Thanh Hoa’s Nghi Son economic zone, in which the country’s oil and gas group PetroVietnam has a 25.1 per cent stake, Kuwait Petroleum International (KPI/KPE) with 35.1 per cent, Idemitsu Kosan 35.1 per cent, and Mitsui Chemical International 4.7 per cent, has the total investment capital of $9 billion.
The complex received its investment certificate for the first time in April 2008, and is now the biggest oil refinery and petrochemical project to have been licensed in the country. The complex’s refining capacity was expected to be 200,000 barrels per day (equivalent to 10 million tonnes per year), using crude oil imported from Kuwait.
The joint venture responsible for the construction of the complex is led by Japan’s JGC, and Japanese contractors such as Chiyoda, South Korea’s GS E&C, SK E&C, France’s Technip France, and Malaysia’s Technip Geoproduction.
Financial institutions have committed to providing $5 billion for the project. Of this sum, $2.3 billion comes from the Japan Bank of International Cooperation (JBIC) and the Korean Export and Import Bank (Kexim). The remaining $2.7 billion is borrowed from commercial banks, with a guarantee from Nippon Export and Investment Insurance (NEXI).
By the end of July, the investors had disbursed their capital 12 times over, with the total investment capital of more than $2.1 billion. The banks have disbursed more than $2.2 billion. According to the investors, pilot operation is going to start in November 2016 and commercial operation in July 2017.
Incentives for the Nghi Son complex are considered much more preferential than incentives for the operating Dung Quat oil refinery in the central province of Quang Ngai, according to Ngo Thuong San, president of the Vietnam Petroleum Association and former general director of PetroVietnam.
For instance, the Nghi Son complex is entitled to retain the preferential value level, which equals 7 per cent of the import tax for oil products, 5 per cent for LPG, and 3 per cent for petrochemical products. This mechanism will last for 10 years from 2017, when the refinery is slated to begin commercial operation, until 2027.
Apart from that, in the case where the import tax of refined and petrochemical products is lower than the preferential value level calculated for sale price (3 per cent for petrochemical products, 5 per cent for LPG, and 7 per cent for petrol and oil), PetroVietnam shall cover the product sale of the Nghi Son complex and factor the preferential value level into the price of covering the product sale.
