Idemitsu Kosan to ink agreement to build second oil refinery in Vietnam

Japan’s Idemitsu Kosan has announced that it will soon conclude its talks on investing in building the Nghi Son oil refinery in Than Hoa, a north central province of Vietnam. Idemitsu Kosan is Japan’s third largest oil refinery company. Japanese oil refiners are looking overseas for expansion opportunities, as the country’s oil demand has declined due to an aging population and an accelerated shift to more environment-friendly energy sources.
The Vietnamese government has agreed to guarantee some of the project’s debt obligations. The financial issue has been a major barrier to most of the negotiations on the investment because banks were not ready to provide loans for the construction without any guarantee. The Nghi Son oil refinery will be the second of its kind in Vietnam. Dung Quat oil refinery was the first to be built, located in the central province of Quang Ngai. The new refinery will be built in Thanh Hoa, 180 kilometers to the south of Hanoi, at a cost of between US$8 billion and US$10 billion.
Construction of the refinery, which will produce 200,000-barrels per-day, is expected to begin in the third quarter of this year. Idemitsu Kosan and Kuwait Petroleum International (KPI) each have a 35.1% stake in the Nghi Son project; while state-run PetroVietnam and Japan’s Mitsui Chemicals Inc. each own a 25.1% and 4.7% stake, respectively.
The plant will process sour Kuwaiti crude oil into petrol and oil products, with a designed capacity of 10 million tons of crude oil per year, 1.5 times higher than the Dung Quat refinery, which is able to meet only one-third of domestic demand for petroleum products. The sour crude oil will be supplied entirely by KPI. Once operational in 2015, Nghi Son will produce not only gasoline, kerosene, jet fuel, diesel fuel, but also asphalt, propylene and benzene, toluene, xylene (BTX). (August 8, 2012)