French-led consortium signs deal to build Vietnam's first ever refinery
HANOI - An international consortium led by French group Technip signed a 1.5-billion-dollar deal to build Vietnam's first oil refinery, the biggest ever investment in the country.
Officials from Technip, Japanese engineering giant JGC Corporation and Spain's Tecnicas Reunidas signed the deal with state-owned giant PetroVietnam in Hanoi.
The long-awaited deal is seen as crucial to giving Vietnam energy autonomy, as, despite being a major crude producer, the communist nation has to import its refined products.
The whole project, which requires the building of a vast infrastructure including a port, is expected to cost a record 2.5 billion dollars, according to several industry estimates.
The signing of the deal was the first concrete step towards the completion of the controversial project which has swallowed up millions of dollars in studies over the past decade.
Tran Ngoc Canh, president and chief executive officer of PetroVietnam, said the deal, signed in Hanoi, was a "critical milestone in the construction of the Dung Quat refinery."
The complex will have an annual capacity of 6.5 million tonnes and the deal will take effect from June 15 with construction expected to take 44 months, according to Vietnamese officials.
The project has been beset by problems for many years, with French oil giant Total -- now known as TotalFinaElf -- pulling out of a deal as far back as 1995.
Total had planned to build the refinery in the oil complex of Ba Ria-Vung Tau, close to Vietnam's offshore oilfields and to the country's southern economic powerhouse of Ho Chi Minh City.
But the French oil giant judged the plan to be commercially unviable after the Vietnamese authorities decided to relocate the facility in Dung Quat, 120 kilometres (75 miles) away from Danang, a central port city.
The choice was partly motivated by Vietnam's desire to develop an industrial counterweight in the centre of the country between the two existing poles, Hanoi and Ho Chi Minh City.
Vietnam then undertook a series of ultimately unsuccessful negotiations with US firms such as Conoco Inc. and Stone and Webster,
South Korea's LG, Malaysia's Petroliam Nasional (Petronas) Bhd and Taiwan's China Development Corp.
PetroVietnam eventually signed a deal with the Russian company Zarubezhneft but it too gave up on the idea in December 2002 and Vietnam declared it would go it alone.
Only five months later, in May 2003, PetroVietnam's general manager and his deputy were dismissed by Prime Minister Phan Van Khai.
Initially valued at about 1.3 billion dollars, the refinery project has nearly doubled in cost, following major modifications stemming from having to adjust plans drawn up in the 1990s to current market conditions.
"Compared to some years ago, it is a different project," a source close to the deal told AFP. "The Vietnamese just wanted the best."
But whatever the price, the refinery is considered indispensable for the country.
Vietnam produced 20.1 million tonnes of crude in 2004, or 13.3 percent more than in the previous year. But lacking refineries, it continues to import all its refined products, losing hundreds of millions of dollars in precious foreign exchange.
Agence France Presse - May 17, 2005.
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