Building of Vietnam oil refinery a step closer
HANOI - Vietnam and a
Russian firm will sign a joint venture deal in two
months to build the country's first oil refinery in a
location described as a ``bad site,'' an executive
said on Friday.
Oleg Popov, general director of Russian state
firm Zarubezhneft, told reporters he was focused
on the long-term potential of the refinery, which
Vietnam's official media have said would
hopefully begin operation in 2004.
The $1.4 billion project has seen off two groups
of foreign investors and been mired in
controversy since Vietnam announced its chosen
location in Dung Quat, a barren place 900 km
(560 miles) from the nation's major oil producing
area in the south.
Popov said the site -- in central Quang Ngai
province -- was undesirable but added
Zarubezhneft would agree to the terms with
Vietnam's oil monopoly Petrovietnam.
``It's a bad site but we take what the Vietnamese
gave us. It is not the best site for us, but
strategically, it is the best for us, and politically,
best for the Vietnamese,'' he said.
``They dictate the rules of the game, and...we
accepted.''
``We are looking at the long-term. We already
produce oil, now we want to refine, then supply
oil in Vietnam,'' he added.
Zarubezhneft operates Vietnam's main oil field in
waters off the south of the country in partnership
with Petrovietnam.
The venture, Vietsovpetro, accounts for the bulk
of Vietnam's oil exports, which totalled 9.7
million tonnes in 1997. Hanoi plans to pump 12
million tonnes this year.
In choosing the refinery site, Hanoi has said it
wants to develop its central provinces, which
have largely missed out on the benefits of
economic reforms adopted in the late 1980s.
Popov was speaking after signing a framework
agreement with Petrovietnam that officials said
paved the way for the actual joint venture deal.
Russian Vice Minister of Fuel and Energy Anatoli
Kozyrev, also in Hanoi for the signing of the
framework agreement, voiced confidence the
project would go ahead and said his ministry
would help Zarubezhneft find the financing if
necessary.
``We have no doubts concerning the formation of
this joint venture,'' Kozyrev said in translated
remarks.
``The two sides will finance this project and I
would like to add the (Russian) Ministry of Fuel
and Energy will provide any support to
Zarubezhneft to find the financial resources.''
When asked if Zarubezhneft would seek to
extend rights on the 30-year Vietsovpetro oil joint
venture signed in 1981 as a sweetener, Kozyrev
said the two projects were separate.
But Kozyrev added he would like to see an
extension for Vietsovpetro of at least 10 years.
Popov said Zarubezhneft and Vietnam would
provide equal funds for the refinery, indicating the
joint venture could be split 50-50. He said he
would also welcome outside investors.
The Dung Quat saga began in 1995 when
France's Total SA pulled out claiming the site
made no economic sense.
A consortium of foreign firms, including South
Korea's LG Group and Petroliam Nasional
Berhad (Petronas Dagang Bhd) of Malaysia,
stepped in to replace Total.
But the group broke up last year after
Petrovietnam rejected its demands for greater
commercial and financial incentives.
A government official said last week Vietnam
hoped to appoint the British arm of U.S. group
Foster Wheeler Corp as technical consultant for
the refinery. Executives from the firm in Vietnam
have not been available for comment.
Nearly all of Vietnam's crude is exported.
Refined oil and oil products must be imported.
By Dean Yates - REUTERS, May 22, 1998.
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