Petrovietnam has proposed an investment of $1.26 billion to expand the Dung Quat oil refinery's capacity to 171,000 barrels per day or 7.6 million tons a year, from the current figure of 6.5 million tons, subject to prime ministerial approval.
It is expected that Petrovietnam's subsidiary Binh Son Refining and Petrochemical JSC (BSR), the operator of the oil refinery, would provide 40% of the investment from its equity, and the remaining 60% from loans.
The initial proposal in 2014 had seeked to raise the capacity to 192,000 barrels per day, with an investment of $1.8 billion.
Per the new proposal, the oil refinery will no longer produce RON97 gasoline and asphalt, while fuel oil for internal use only. While it will reduce the output of LPG, RON92 gasoline, A1 jet fuel, diesel oil, propylene, and sulfur, it may produce RON95 gasoline.
The 37-month project is scheduled to complete in the fourth quarter of 2025 and begin commercial operation in the first quarter of 2026.
The oil refinery, which is based in the central province of Quang Ngai, also planned to increase its ratio of imported crude oil from 21.4% last year to 35-46% this year.
The facility, the first of its kind in the Southeast Asian nation, began commercial operation in 2009, fulfilling 30% of domestic demand for gasoline in Vietnam.
Commenting on the proposal, the Ministry of Industry and Trade said BSR’s profits of VND345.77 billion ($14.32 million) in 2018-2020 only meets 2.7% of the capital requirement.
However, BSR said its profits between 2018 and June 2022 reached VND19,500 billion ($808 million), so if there are no major changes in profit flows in the second half of 2022 and 2023, the firm is capable of providing 40% of the project investment from its equity ($500 million).
The ministry also asked BSR to carefully factor in the global risks, particularly the Russia-Ukraine conflict and the energy crisis in Europe, in the imports of crude oil for the refinery.
State-run Petrovietnam is the biggest shareholder of BSR, holding a 92.12% stake.
Vietnam now has two operational oil refineries - Nghi Son Refinery and Petrochemical complex in Thanh Hoa province, and Dung Quat in Quang Ngai province, both in the central region.
Nghi Son is a $9 billion refinery co-owned by state-run Petrovietnam, Kuwait Petroleum Europe B.V. (KPE) and Japan’s Mitsui Chemical and Idemitsu Kosan Co.
Thailand-backed Siam Cement Group (SCG) is nearing the completion of its $5.4 billion Long Son Petrochemicals Complex in Ba Ria-Vung Tau province, expecting a full start-up in the first half of 2023. It will be Vietnam’s third operational oil refinery.
State-run Petrovietnam in August proposed the government consider investment for a $19 billion oil refinery and national crude oil, petroleum reserve in the Long Son Petroleum Industrial Park of Ba Ria-Vung Tau, to ensure the country’s oil and gas security.