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09 December 2023

Vietnam to open first oil refinery

Dung Quat oil refinery plant is seen in Vietnam's central Quang Ngai province. (REUTERS)


Vietnam was to open its first oil refinery Sunday after more than a decade of delays, in what is being hailed as a significant moment in the country's development and energy security.

Prime Minister Nguyen Tan Dung is expected to inaugurate the more than 2.5-billion-dollar Dung Quat refinery Sunday evening live on prime-time television, an indication of its importance to the communist country.

Although Vietnam has considerable offshore oil reserves, it currently has to import all its petroleum products, costing the Southeast Asian nation hundreds of millions of dollars as energy consumption soars.

It spent $10.88bn importing refined products in 2008, according to official figures, while exporting $10.45bn of crude oil.

State-owned PetroVietnam Group financed and will run the new facility, which is expected to churn out 6.5 million tonnes a year or 148,000 barrels per day - about 30 per cent of the country's needs.

PetroVietnam, which expects the refinery in the centre of the country to be at full capacity from August, is designing another refinery, in the north, and has tentative plans for a third as Vietnam strives for energy autonomy.

"Dung Quat refinery is one of the most modern in the world," said Dinh Van Ngoc, senior vice-president and chief executive of the arm of PetroVietnam that will run and manage the facility.

"It's very meaningful for Vietnam, both practically and also spiritually - it can prove to the whole nation and Vietnamese people that Vietnam can build a refinery."

Ngoc told AFP the final cost of the refinery would be higher than $2.5bn, but declined to be more specific.

The complex, built by an international consortium led by French oil services group Technip, has a long and chequered history.

When plans were first drawn up in the 1990s, the estimated cost was 1.5bn.

But several foreign backers pulled out, among them French giant Total, which baulked at the authorities' insistence that the refinery be built in a mainly agricultural area with no tradition of heavy industry.

Critics and foreign investors argued that central Quang Ngai province was too far from the offshore oil reserves in the south and from Ho Chi Minh City, Vietnam's commercial capital.

Experts say the government refused to have the first refinery anywhere else because it wanted to develop one of the poorest regions in the country.

The communist leaders also want to forge a new industrial area as a counterbalance to the capital Hanoi, in the north, and Ho Chi Minh City, formerly Saigon, in the south.

Authorities hope the refinery and the industrial zone being built around it will create jobs for more than 20,000 people in the area, spurring the local economy.

New roads have been built in the zone and around the refinery, with a handful of new factories springing up, including at least one from South Korea.

Bruno Le Roy, the engineer managing the site for Technip, acknowledged it was "a political decision" to build the refinery in Quang Ngai province, referring to the authorities' determination to bring money to central Vietnam.

"I've seen in the last two years a big change in this area," he told AFP at the refinery, which covers 338 hectares of what was once farmland.

But local menial labourer Nguyen Van Ha, 28, said the refinery offered nothing for the millions of unskilled workers in the region.

"I wish I had some skills to find a stable job there but I know nothing about it so I don't see it meaning much to me," he said.

Vietnam's economy grew 8.5 per cent in 2007, and its energy needs for industry, households and transport are estimated to be rising at twice that rate.

Economic growth was however down to 6.2 per cent in 2008, the lowest level in almost a decade, although premier Dung earlier this month said he expected the slowdown to end by May.