Vietnam’s biggest refinery strikes funding deal to keep going

The new deal will help enable the cash-strapped Nghi Son Oil Refinery to continue operations, Do Thang Hai, deputy minister of industry and trade, told VnExpress on the sidelines of a government press conference Friday.

The ministry has asked the refinery to be responsible for ensuring sufficient supply according to contracts signed with gasoline traders, he said.

In case it is not able to produce enough gasoline and oil, the products should be imported or sourced elsewhere to make up for the shortfall, he added.

“Currently, we can still ensure supply. We are trying our best to ensure the supply of gasoline for domestic consumption,” the deputy minister said.

The Nghi Son Oil Refinery in the central province of Thanh Hoa has recently cut production by 20-25 percent because it no funds to import crude oil and had said it might have to suspend operations starting mid-February if the problem was not resolved.

If the production cut continues, Vietnam could experience a gasoline shortage, given that the refinery has a market share of over 35 percent, observers said.

PVN said Friday it has negotiated and reached a consensus with Nghi Son’s foreign partners. Accordingly, all sides have accepted proposed principles on restructuring the refinery in return for the provision of short-term funds.

An expert in the local petroleum industry said the refinery will not be able to restore 100 percent of capacity immediately. “Disbursing capital and then importing crude oil takes time,” he explained, but expressed his belief that gasoline supply would be “less messed up than happened over a week ago.”

Capitalized at $9 billion, the refinery has a phase 1 capacity of 200,000 barrels of crude oil a day, or 10 million tons of crude oil a year, nearly double that of the Dung Quat Oil Refinery in the central province of Quang Ngai. It started commercial operations in late 2018.

PVN has a 25.1 percent stake in Nghi Son, while the rest is owned by three foreign firms, Kuwait Petroleum International (35.1 percent) and Japan’s Idemitsu Kosan (35.1 percent) and Mitsui Chemicals (4.7 percent).