Hanoi finally seals major oil refinery joint venture
HANOI - Vietnam and Russia's
state-run Zarubezhneft signed a joint venture contract on
Thursday to build a $1.3-1.4 billion oil refinery, a
controversial project that saw off two groups of foreign
investors.
Officials said the deal was split 50:50 between Vietnam's
state oil monopoly Petrovietnam and Zarubezhneft. The
refinery, Vietnam's first, could be operational by 2002,
they said.
Engineering firm Foster Wheeler Corp of the U.S. would
manage the project but hold no equity.
Unexplained hitches delayed the signing ceremony by
more than 90 minutes. Industry sources said
Zarubezhneft had objected to a key part of the contract.
Ho Si Thoang, chairman of Petrovietnam, told reporters
that Vietnam and Zarubezhneft would contribute $400
million each to the venture, called the Vietross Refinery.
He said the venture would also seek to borrow
$500-600 million, bringing total investment to $1.3-1.4
billion.
``This is an important day for the country,'' Planning and
Investment Minister Tran Xuan Gia told Reuters.
A deal to finance the refinery, which is expected to have
capacity of 130,000 barrels per day, was inked last
August but signing of the joint venture had been delayed
several times.
Vietnam, a minor world oil producer, exports all its
crude. It imports all its oil and refined oil products.
Thoang said Vietnam's share of the necessary funding
would come from Petrovietnam's oil revenues.
He said Zarubezhneft would partly use profits from an
existing joint venture called Vietsovpetro which operates
Vietnam's main oilfields in waters off the country's south
in partnership with Petrovietnam.
That venture 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.
Nevertheless, the project has been dogged by
controversy.
Its chosen location at Dung Quat in central Vietnam --
900 km (560 miles) from the nation's major oil
producing area in the south -- and the huge sums to be
invested by a very poor country has long puzzled
analysts.
France's Total SA pulled out in 1995 saying the project
made no economic sense. A group of alternative foreign
investors rounded up by Petrovietnam followed suit last
year.
``The rule of thumb has always been to put refineries
near the point of production or your consumers. Vietnam
will run against history and put it in neither,'' said one
analyst.
Hanoi has made clear the project would go ahead at
Dung Quat to develop poor central provinces that have
largely missed out on the fruits of economic reforms
adopted a decade ago.
``It's sad that non-economic factors appear to be
influencing energy policy decisions,'' Al Troner,
managing director of Kuala Lumpur-based Asia Pacific
Energy Consulting, told Reuters earlier on Thursday.
Hanoi should instead focus on reaching a deal with
foreign partners to tap the country's largest gas reserves,
he said.
More than four years after the gas reserves were found
off Vietnam's southeastern coast, talks between British
Petroleum and Norway's Statoil have been deadlocked
with Petrovietnam over pricing the gas.
``The economic benefits, the multiplier effect of quickly
getting the gas pipeline system on line and then
expanding this are far greater than the refinery,'' he said
by telephone.
``Most regional analysts believe that at this time...it may
not be the appropriate time to invest a large sum of
capital in a facility that will compete against already
established refineries that can afford to discount.''
Reuters - November 19, 1998.
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