Eric Watkins
Oil Diplomacy Editor
Japan's oil and gas industry got a boost last week when a five-company consortium led by JGC Corp. received exclusive negotiating rights to build a refinery in Vietnam. The boost followed a decision by the Japanese government to promote a public-private initiative to share infrastructure-building know-how with Vietnam, aimed at winning work for Japanese plant engineering firms in the Southeast Asian country.
JGC, Chiyoda Corp., Technip, SK, and GS are expected to sign a formal contract by March 2011 after an assessment by the bid solicitor, a four-company group comprised of Idemitsu Kosan, Mitsui Chemicals, Kuwait Petroleum International, and Vietnam Oil & Gas Group (PetroVietnam).
The entire project, to be completed by yearend 2014, will cost an estimated $8 billion.
Japanese financing
The 200,000-b/d refinery, which alone will cost $5 billion, will process Middle Eastern crude, turning out polypropylene in addition to gasoline, diesel oil, kerosine, and jet fuel.
Idemitsu and three other firms will finance 30-40% of the project with their own money, with the balance to be borrowed from private banks and government-affiliated banks such as the Japan Bank for International Cooperation (JBIC).
A few weeks ago, Japan announced plans for JBIC to provide $250 million to a major Vietnamese bank as early December aimed at creating opportunities for Japanese companies to increase infrastructure-related exports to Vietnam.
Earlier this year, the Vietnamese government approved plans to raise capacity of the 148,000-b/d Dung Quat refinery to 200,000 b/d. The facility, Vietnam's only such facility, went on stream in February 2009 (OGJ Online, Aug. 13, 2010).
JGC wins again
In October, PetroVietnam awarded JGC a $2.5 million contract to prepare a feasibility study, to be completed in 22 weeks, for the plans to expand the Dung Quat refinery—clearly needed according to recent reports.
Two weeks ago, Vietnamese state media reported that the Dung Quat facility is operating 5.9% above its design capacity to meet rising demand for domestic oil products.
The Thoi Bao Kinh Te newspaper, quoting an executive with the operator of the plant, said Vietnam's demand for domestic oil products has risen due to the shortage of foreign currency and an unfavorable foreign exchange rate.
As a result, PetroVietnam last week said it was speeding up negotiations for the Dung Quat expansion project with its partners Petroleos de Venezuela SA, Gazpromneft, TNK-BP, Slovaft, MOL Group, Petronas, SK Energy, and Nippon Oil.
Meanwhile, the welcome news that the JGC-led consortium has the inside track to build Vietnam's second and largest refinery cheered investors, sending JGC shares up 2%.
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