Hanoi (VNA) - Themulti-billion-dollar Dung Quat oil refinery upgrade and expansion project isbeing implemented very slowly and its operator has repeatedly asked theVietnamese Government for support and incentives.

According to the Ministry of Industryand Trade (MOIT), the expansion project, which will cover 108 hectares of landin the Dung Quat Economic Zone in the central province of Quang Ngai, has beenstalled due to problems in land clearance and capital access.

The MOIT has acknowledged that the siteclearance of 108 hectares of land was expected to be completed by March2016. However, the handover of the land was delayed by a year and thecompensation procedure has not been completed.

State-owned Binh SonRefining and Petrochemical Company Limited (BSR), the operator of Dung QuatRefinery, previously said the expansion would cost some 1.8 billion USD, of which equity capital and loans wouldaccount for at least 30 percent and 70 percent, respectively.

The BSR plans to borrow 1.26billion USD, it said, but added that giventhe large estimated loan amount it has asked that the Government guarantees theloan with the lowest possible cost and longest possible term.

ౠ[Dung Quat oil refinery works on expansion project]

In November 2009, the Government issueda decision allowing the BSR to annually retain an amount of money equivalent to3 percent of import duty on petrochemical products, 5 percent from import taxon LPG products and 7 percent of import duty on petroleum products.Potential foreign partners, such as JXNippon from Japan, Gazprom Neft from Russia and PDVSA from Venezuela, withdrewfrom the project after the Government rejected a request to extend taxincentives for the Dung Quat oil refinery. 

In order to improve the economicefficiency of the project, the Vietnam National Oil and Gas Group (PVN) hasrequested that BSR cut costs relating to investment and operations and optimisethe production process.

If the project cannot achieve itstargeted economic efficiency, the Dung Quat Refinery’s petroleum products willnot be qualified for domestic consumption and will have to seek export markets,forcing the refinery to reduce capacity or even stop operations.

According to BSR, upgrading andexpanding the Dung Quat refinery is essential to allow factories to processcrude oil with higher sulfur content, reducing dependence on domestic sweet oil(with less than 0.42 percent sulfur), which is both expensive and at riskof being exhausted.

At the same time, the upgrade andexpansion of the refinery will also help it realise its goal of increasing thestable supply of petroleum products in accordance with the Euro 5 standard.

“Expansionwork is expected to be completed by 2021, following which the Dung Quat OilRefinery will have capacity to refine 8.5 tonnes of crude oil meeting Euro 5quality standards per year,” said BSR Director Tran Ngoc Nguyen.

According to Nguyen, BSR is seekingloans at the lowest possible cost and longest term, adding that the group stillwished to receive a Government-guaranteed loan so that it can access an optimalsource of funds for the expansion project.

Tran Viet Ngai, Chairman of the VietnamEnergy Association, said that the Dung Quat Oil Refinery expansion projectplays an important role in the development strategy of Vietnam’s oil and gasindustry.

“It is crucial to solve the urgentproblem of capital mobilisation. If the public debt pressure is too high andthe Government cannot guarantee the loans, the project operator can considercommercial loans because the project must be carried out no matter what,” Ngaisaid.-VNA