Mechanisms needed for new investments to increase oil refinery capacity

Monday, Jan 09, 2023 10:47

A corner of Dung Quat Refinery. It is important to ensure energy security in complicated world developments. — VNA/VNS Photo Huy Hung

Ways must be found to boost investment in improving oil refinery capacity to meet domestic demand while decreasing reliance on imports. This is especially important as global oil and gasoline prices fluctuate significantly.

The Dung Quat Refinery, Nghi Son Refinery and Petrochemical Complex, and processing plants with a total annual capacity of 14 million tonnes of petrol and oil, meet about 70 per cent of the domestic demand, according to the Ministry of Industry and Trade. Imports make up for the shortage.

The Vietnam Oil and Gas Group (PetroVietnam) proposed to increase the Dung Quat Refinery to 7.5 million tonnes per year and does not have any plans to expand Nghi Son.

The ministry estimated that by 2045 Viet Nam would face a shortage of 12 million tonnes of petrol and oil per year and 3.5 million tonnes of petrochemical products.

PetroVietnam anticipated bigger shortages compared to the ministry’s estimate, nearly 12 million tonnes of petrol and oil by 2025 and nearly 20 million by 2030.

PetroVietnam proposed a refinery complex to be developed in Ba Ria – Vung Tau with a capacity of 12-13 million crude oil per year in the first phase, together with 660,000 tonnes of condensate, LPG and Ethane to bring to the market 7-9 million tonnes petrol and oil and 2-3 million tonnes petrochemical products per year.

In the second phase, the project would be expanded to increase the production capacity by 3-5 million tonnes of petrol and oil and 5.5-7.5 million tonnes of petrochemicals.

In addition, PetroVietnam also proposed a national crude oil and petroleum product reserve project with a scale of one million tonnes of crude oil and 500,000cu.m petroleum products per year.

PetroVietnam estimated that around US$12.5-13.5 billion was needed to build the complex in the first phase and $4.5-4.8 billion in the second phase.

According to the Ministry of Industry and Trade, there were some grounds for the proposal. In the context of complicated world developments with the risk of energy supply disruptions and rising energy prices, it was important to ensure energy security, in which ensuring adequate petroleum supply and increasing national reserve capacity were vital, the ministry said.

The ministry asked PetroVietnam to continue to study the projects to raise it for comments.

While it would take a lot of time to prepare issues related to the investment process of the refinery and oil reserve complex, the increase in petrol and oil domestic production capacity could only be expected from the Dung Quat refinery expansion project.

According to Binh Son Refining and Petrochemical Joint Stock Company, which operated Dung Quat Refinery, the expansion would cost around $1.2 billion to increase the capacity from 6.5 million tonnes to 7.5 million tonnes and be implemented in 37 months before being put into commercial operation in the first quarter of 2026. To date, the evaluation of the expansion project has not been completed. — VNS

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