JX Nippon Oil invests in Nam Van Phong
JX Nippon Oil invests in Nam Van Phong
Japan’s JX Nippon Oil and Energy Corporation last week officially agreed to purchase an 8 per cent stake in state-run Petrolimex, which holds 55 per cent of the local petroleum retail market share.
The Japanese oil and gas giant signed a share subscription agreement to buy into Vietnam’s largest distributor of petroleum products. This move will help JX Nippon secure business opportunities in Vietnam where the current demand for petroleum products is approximately 350,000 barrel/day and rising steadily.
The acquisition shifts JX Nippon one step closer to building its first overseas oil refinery in Vietnam, and may even position it in the petrol distribution business across the country.
“As part of our co-operation strategy, JX Nippon and Petrolimex have signed a memorandum of understanding to start a joint study for the construction of a refinery in Van Phong Economic Zone,” said NOE president Tsutomu Sugimori in a recent speech.
The $8-billion Nam Van Phong oil refinery project, which is expected to go online by mid-2020 at the earliest, will produce approximately five million tonnes of crude oil per year. The prime minister gave in-principle approval for the project, and assigned Petrolimex to begin the process of project planning, and selecting co-investing foreign partners with sufficient capability, experience, and commitment in providing crude oil.
Petrolimex’s chairman Bui Ngoc Bao said the deal with JX Nippon had been under negotiation for nearly two years. It had planned to sell 20 per cent of its stake to JX Nippon at first, but the figure was reduced to 8 per cent due to existing difficulties in the market, which were raised at the shareholders’ meeting late March.
According to Bao, if the deal is approved by the group’s shareholders, a portion of the capital earned from the sale will be used to restructure the finances of Petrolimex Singapore Pte. Ltd, which is currently reeling under losses amounting to trillions of dong.
Petrolimex was recently found violating several capital and asset management regulations between December 26, 2013 and June 17, 2014. Following an inspection of the group during this period, the Government Inspectorate of Vietnam uncovered multiple violations in the use of assets and capital, in equitisation, in the management of its parent company and subsidiaries, as well as in construction and land use.
Petrolimex incurred significant losses through its financial investments into businesses far removed from its core operations.
The report pointed out that Petrolimex’s investment of VND400 billion ($18 million) in PG Bank, VND171 billion ($7.7 million) in PG Insurance, and VND51 billion ($2.3 million) in PetrolimexLand were all carried out without permission from the Ministry of Industry and Trade or the prime minister.
The Government Inspectorate of Vietnam has therefore proposed that the government fine Petrolimex VND1.2 trillion ($54 million), as well as an additional $310,000 for misuse of capital and funding between 2010 and mid-2013.
