Biggest Vietnam Oil Refinery Boosts Output as Defects Fixed

(Bloomberg) -- The biggest oil refinery in one of Asia’s fastest-growing economies is ramping up production and expects to run at full capacity in September after a 16-month delay due to faulty construction, its general director said.

Vietnam’s Nghi Son refinery, in which state-run Kuwait Petroleum Corp. and Japan’s Idemitsu Kosan Co. each own 35.1 percent, plans to begin commercial operations by Nov. 15, Shintaro Ishida said in an interview at the plant in Thanh Hoa province. The facility is on track to reach its processing limit of 200,000 barrels a day of crude in September, after which it will complete the performance tests and documentation needed to operate commercially, he said.

The joint venture, known officially as Nghi Son Refinery and Petrochemical Co., had to delay the start of full operations mostly as a result of “welding defects” and other construction faults, Ishida said. It expects to export fuel products in September and October, probably in Asia, and then shift to selling entirely within Vietnam, he said.

Nghi Son will shut down in April and May for regular maintenance, he said, without specifying dates for the work.

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The $9 billion refinery will enable Vietnam to cut diesel and gasoline imports from neighboring countries, including South Korea, Singapore and Malaysia. Because it will process Kuwaiti crude, Nghi Son is also part of a trend in which Middle Eastern crude producers are seeking to invest in Asian refineries to secure sales in the biggest oil-consuming region. Vietnam’s economic growth rate accelerated in the second quarter to 6.8 percent and is poised to remain one of the world’s fastest.

Nghi Son is targeting domestic sales with an output of diesel, gasoline and jet fuel. At the same time, if overseas demand is strong, “we can consider to export” even after October, Ishida said. The refinery has government approval in principle to export fuel, though it will still need permission for each shipment, he said.

The plant will start producing polypropylene and other petrochemicals in 2019, selling them to its Japanese and Kuwait partners, Ishida said.

Vietnam Oil & Gas, known as PetroVietnam, owns 25.1 percent of the venture, while Mitsui Chemicals Inc. holds the remaining 4.7 percent. Nghi Son is Vietnam’s second oil refinery after Dung Quat, which started operations in 2009.

To contact the reporters on this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net;John Boudreau in Hanoi at jboudreau3@bloomberg.net

To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net, ;Nayla Razzouk at nrazzouk2@bloomberg.net, Bruce Stanley, John Deane

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