Gazprom Neft hopes to close Vietnamese refinery deal eyed by Rosneft
RUSSKY ISLAND. Sept 8 (Interfax) - Gazprom Neft and PetroVietnam are planning to sign a memorandum regarding the Russian oil company's participation in modernizing the Zung Kuat oil refinery in Vietnam in September 2014, according to the minutes of a meeting of the Russian-Vietnamese intergovernmental commission, a copy of which was obtained by Interfax.
"The parties backed Gazprom Neft's and PetroVietnam's bid to fully close the deal over acquisition of the stake in Binh Son Refining and Petrochemical (which operates the oil refinery) and participation in the modernization and expansion of the oil refinery before the end of 2014," the document said.
It was reported earlier that another Russian oil firm, Rosneft , was keen on modernizing and supplying oil to the Vietnamese oil refinery. These issues were discussed earlier this week at a working meeting between Rosneft chief Igor Sechin and PetroVietnam chairman Nguyen Xuan Son.
The protocol also points to the high degree of readiness of the text of the intergovernmental agreement for operation and modernization of the Zung Kuat oil refinery. It is expected to be signed in the very near future after being agreed by the two countries' governments.
"The parties backed Rosneft's active participation in hydrocarbon exploration and mining on the Vietnamese shelf in close cooperation with PetroVietnam," the protocol said.
During Russian President Vladimir Putin's earlier visit to Vietnam the two countries signed documents whereby Gazprom Neft could acquire 49% in Binh Son.
Later Russia and Vietnam signed a draft intergovernmental agreement whereby Russia, after acquiring the stake, will have the obligation to supply oil to the Zung Kuat refinery. The following volumes were stipulated: 3 million tonnes in 2015, 3.6 million tonnes in 2016, 4.8 million tonnes in 2017, and at least 6 million tonnes in 2018 and thereafter.
Under the draft intergovernmental agreement, after buying 49% in Binh Son, Gazprom Neft will be able to further increase its stake in Zung Kuat's operator.
Gazprom Neft estimates the cost of the Vietnamese refinery's modernization at $1-1.5 billion. The modernization involves plans to increase the refinery's installed capacity from the existing 6.5 million tonnes to 10-12 million tonnes per year and to raise the efficiency the facility's technological processes to ensure its transition to production of engine fuels according to the Euro 5 standard. Gazprom Neft's participation in co-financing the modernization project will be proportionate to its stake.
Zung Kuat started operating in February 2009. The oil refinery with an annual capacity of 6.5 million tonnes consumes about 85% of the domestically-produced crude oil (from the oil deposit developed by Vietsovpetro, a joint venture of Zarubezhneft and PetroVietnam), while 15% of its oil comes from countries in the Middle East.