Finance Gears Oiled For Nghi Son Refinery

By StoxPlus., July 17th, 2013

Financial arrangements for $9 billion in capital to begin work on Vietnam’s second oil refinery and petrochemical complex in central Thanh Hoa province have been agreed.

According to Phung Dinh Thuc, chairman of the management board of state-run Vietnam Oil and Gas Group (PetroVietnam), foreign investors have concluded their capital investment preparations into the Nghi Son refinery and petrochemical complex.

“PetroVietnam’s counterpart capital is also making good progress and hasn’t hit any snags so far,” Thuc confirmed.

However, Thuc said that one of the foreign partners would be unable to commence work on the project due to domestic considerations until September or October this year.

In June this year, Japanese Idemitsu Kosan – the partner with the biggest stake in the joint venture to construct the oil refinery and petrochemical complex announced that it had reached a final investment decision on the Nghi Son Refinery and Petrochemical Limited Liability Company’s (NSRP) petroleum refinery and related projects with co-investors Mitsui Chemicals, Inc, Kuwait Petroleum International, and PetroVietnam.

NSRP signed project financing agreements in parallel on the aggregate total of up to $5 billion with public financial institutions and commercial banks.

Among those were direct loans of $2.3 billion from the Japan Bank for International Cooperation (JBIC) and the Export-Import Bank of Korea (KEXIM) and the total loans of $2.7 billion from commercial banks.

The loans from commercial banks have been insured and guaranteed by the Nippon Export and Investment Insurance (NEXI) and other overseas export credit agencies, according to Idemitsu Kosan.

JBIC will provide an overseas investment loan of up to $1.65 billion and NEXI will provide an overseas untied loan insurance for up to $1.3 billion provided by commercial banks.

KEXIM will also provide $1.1 billion, consisting of a $0.66 billion in loan form and $0.44 billion guarantee. In addition, Idemitsu Kosan will provide a completion guarantee of 35.1 per cent of NSRP’s liabilities to lenders until the completion of the project construction, corresponding to its interest percentage in shares. The remaining $4 billion will be directly borne by the project investors. Of this amount, Idemitsu Kosan will provide investments and loans of approximately $1.4 billion, corresponding to its percentage stakeholding.

Located across 400 hectares in Nghi Son Economic Zone in central Thanh Hoa province, the Nghi Son refinery and petrochemical complex will be built by a joint venture between Idemitsu Kosan (35.1 per cent), Kuwait Petroleum International (35.1 per cent), PetroVietnam (25.1 per cent) and Mitsui (4.7 per cent).

Following this final invest decision and the cofinancing agreement, Idemitsu Kosan announced that construction of the project was expected to commence in the latter half of this year. Construction is expected to be completed in 2016 and commercial operations are expected to commence in 2017.

The complex will have the total refining capacity of 200,000 barrels per day and will be fed by Kuwaiti heavy crude oil. After being put into operation, the complex will help increase Vietnam’s ability to meet the domestic demand to around 70 per cent, up from the current 30 per cent.

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