Vietnam says Russia's withdrawal from oil refinery venture will not harm ties
HANOI - Foreign Ministry
spokeswoman Phan Thuy Thanh has affirmed
that Russia's pull-out from a joint venture [JV]
with PetroVietnam in building the Dung Quat
oil refinery does not affect the long-standing
friendship and multi-dimensional cooperation
between the two countries.
Regarding the official notification sent by senior
Russian government officials on 19 November
that Russia would pull out of the joint venture
(Vietross), the spokeswoman on Thursday [21
November] said Vietnam and Russia were now
discussing issues related to the Dung Quat oil
refinery project.
"No matter what decision is taken on the
project, it will not affect our countries' traditional friendship and multi-faceted cooperation, which are
developing in line with the spirit of a strategic partnership," Thanh stressed.
On the tempo of construction and challenges faced by Vietnam when it takes over the whole project's
construction, Nguyen Xuan Nham, director-general of the Vietnam Oil and Gas Corporation (PetroVietnam),
said Russia's withdrawal will cause some difficulties in investment capital and construction engineering.
Each side has now contributed 220m dollars to the project, including about 100m dollars disbursed.
PetroVietnam plans to increase the investor's capital, take out further loans from domestic banks and
export credit to ensure the supply of sufficient capital for the project, he said.
Although Vietnam still lacks experience in building an oil refinery, it has well trained and qualified staff in
this sector. In the near future, PetroVietnam will request permission to hire project management consultants
to oversee the project. To ensure that the dissolution of the JV exerts no effects on the sector's
development plan, PetroVietnam is speeding up construction work at some source projects, including Phu
My nitrogenous fertilizer plant and the Ca Mau gas-electricity-nitrogenious fertilizer complex as well as
pushing forward oil exploitation at new fields such as Su Tu Den (Black Lion), Su Tu Vang (Yellow Lion),
and Rang Dong (Dawn).
Nham said that procedures for the dissolution of the JV will be carried out in the near future. The
governments of the two countries shall immediately exchange protocols on the transfer of the company by
the Russian government to the Vietnamese government, so that the Vietnamese side can apply for a
licence for a wholly domestic invested company.
PetroVietnam plans to continue to employ Russian experts working at the JV if they are willing to work in
the new company. On six of the seven project bidding packages under implementation, the two sides will
have to follow a number of re-signing procedures and change the name of orders placed from Vietross to the
Vietnamese side. Regarding package No 1 - the most important of the project - PetroVietnam is negotiating
with Technip group of France to sign an agreement in the near future.
Vietnam News Agency - November 22, 2002.
Viets to pursue refinery as Russia quits
HANOI - State-run Petrovietnam plans to push ahead on its own to build the country's first refinery
after its Russian partner decided to withdraw from the $1.3 billion project over
disagreements.
The departure of state-run Zarubezhneft comes after France's Total SA withdrew in 1995,
arguing the project did not make economic sense.
The refinery is to be built at Dung Quat, in the central coastal province of Quang Ngai near
Danang, which is hundreds of miles from the nearest crude supplies and potential markets and
is part of Vietnam's efforts to feed its growing energy needs.
"The Russian side have officially decided to withdraw from the project. The Russian side and
Petrovietnam have reached a basic agreement for the pull out," Dinh Huu Loc, acting general
manager of international cooperation at Petrovietnam told Reuters yesterday.
The official Vietnam News Agency said Vietnam Prime Minister Phan Van Khai had sent Russian
leaders a letter proposing the dissolution of the venture, known as VietRoss, and that the
Russians agreed on November 19 to withdraw from the project. Hanoi-based representatives
of Zarubezhneft could not immediately be reached for comment.
Yesterday's Tuoi Tre (Youth) newspaper quoted Pham Quang Du, chairman of Petrovietnam's
management board, as telling a session of legislators that Vietnam has decided to "self-support"
the project for completion in 2005 and operational in 2006.
Loc told Reuters disagreements over "many issues" between the 50-50 partners led to the
dissolution of the joint venture. Du was quoted as saying the project's key engineering
procurement contract, worth $740 million, was one of the unresolved issues.
Vietnam chose the Technip/JGC/Tecnicas Reuni-das consortium, formed in April by France's
Technip-Colflexi, Japan's JGC Corp and Spain's Technicas Reunidas Corp, for the main refinery
contracts.
The refinery was estimated to have an annual capacity of 6.5 million tonnes (130,000 barrels
per day). Once completed, the refinery was expected to meet the majority of Vietnam's oil
processing needs.
In October, Petrovietnam told Reuters operations at the Dung Quat refinery would start in
mid-2005 instead of next year due to difficulties in the tendering process for subcontracts.
While crude oil is the Southeast Asian country's biggest export, Vietnam lacks the ability to
process oil, and must re-import the finished product.
Crude oil exports accounted for 20 per cent of $13.4 billion of total exports in the first 10
months of this year.
The withdrawal of the Russians was disclosed to Vietnam's National Assembly, its highest
legislative body, which is currently holding its second annual session.
The refinery is one part of Vietnam's efforts to shore up its energy needs. The country of 80
million has one of the lowest energy consumption levels in the world which the government
plans to tackle.
State utility Electricity of Vietnam said between now and 2010 it would build 37 power plants,
including 22 hydropower stations, eight thermal plants using oil and gas and seven coal-fired
plants in the sector's biggest expansion.
The World Bank estimates Vietnam will need to invest 5.3 to 5.5 per cent of its GDP, or twice
the level of its Southeast Asian neighbours, in essential energy infrastructure.
Next week, the country expects its first commercial gas flows from the southern $1.3 billion
Nam Con Son project.
Reuters - November 22, 2002.
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