Kuwait, Japan sign $6 bn Vietnam oil refinery deal
Posted: 14 April 2008
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State-run Kuwait Petroleum International (KPI) formed a joint venture last week with Japan's third-biggest refiner Idemitsu Kosan Co. to construct a $5.8 billion refining and petrochemical complex in northern Vietnam, state news agency KUNA said.
The agreement is known to be the first-ever Kuwaiti-Japanese project to build a refinery in a third country.
KPI, an international unit of Kuwait Petroleum Corporation (KPC), and Idemitsu Kosan Co. will evenly own a 35.1% stake in the venture with a capitalisation of 200 million, while state-owned PetroVietnam will hold 25.1% and Mitsui Chemicals Inc. 4.7%.
The so-called Nghi Son Refinery Petrochemical LLC, slated to receive an investment license by June, will spend two years in studying basic equipment design, economic efficiency and finance schemes to determine whether to build the plant.
If realised, construction of the refinery and petrochemical complex will start as early as 2010, targeting to be operational late 2013, KUNA said.
The Nghi Son refining and petrochemical complex, to be located in 180 kilometers south of Hanoi with a refining capacity of 200,000 barrels per day (bpd), will become Vietnam's second oil refinery. The refinery will be designed to process 100 % Kuwaiti heavy crude oil, which churns out high-end petroleum products such as gasoline and kerosene in a cost-effective manner, the report said.
According to KUNA, the partners will aim to secure about 70% of the construction costs through project financing led by the government-affiliated Japan Bank for International Cooperation (JBIC). The participating firms will provide the reminder of the funds, according to their percentage of the stake acquisition. For instance, KPI and Idemitsu are likely to contribute around $600 million each.
By forging alliances, the project will leverage Kuwait's stable crude oil supply and Japanese firms' oil refining and petrochemical business experiences in Vietnam, where demand for oil products is rapidly increasing. The country currently relies heavily on foreign suppliers. The project is expected to contribute half of Vietnam's demand for petroleum products by 2015.
KPC has been developing partnerships in China and India with Asian oil companies for major refining, petrochemical and infrastructure projects, a move that will add value to Kuwait's crude oil production and secure stable customers in the world's fastest-growing economies.
In China, KPC is participating in a joint venture with Royal Dutch Shell Plc. for the 240,000 bpd refinery in the eastern Fujian Province, which is expected to go onstream as early as January 2010. State-run Sinochem will own 51 stake in the project, with KPI and Shell each holding a 24.5 stake.
The planned refinery is also specifically designed to refine heavy Kuwaiti crude.
The Kuwaiti corporation is also making progress on a USD 5 billion project with China's top refiner Sinopec and Dow Chemical Co. to construct a plant in the southern Guangdong Province.
With the mega complex, featuring a refinery capable of processing 300,000 bpd and one million tonnes-per-year ethylene steam cracker, KPC seeks to further boost its crude oil sales in the world's second-biggest energy market. If approved, it would become the biggest Sino-foreign joint venture in the Chinese refining and petrochemical industry. Findings of its ongoing feasibility study are expected to be presented to the Chinese authorities for approval sometimes this year. |
