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Refinery JV with Kuwait, Vietnam important: Idemitsu president First phase of the project to be operational by 2017

HANOI, Jan 28, (KUNA): Head of major Japanese refiner Idemitsu Kosan Co reconfirmed the importance of the $9 billion joint venture with Kuwaiti and Vietnamese partners to the company’s business expansion in Asia.
Idemitsu President Kazuhisa Nakano made remarks to Kuwait News Agency (KUNA) on the occasion of the signing ceremony of the engineering, procurement and construction contract held on Sunday with an international consortium for the Nghi Son Petrochemical Refinery Project.
“Establishing a business footing in Vietnam is strategically important, which is expected to become our base for such countries as Laos, Cambodia, and Myanmar,” said Nakano. “In face of a contracting domestic market, we will be increasingly focusing on our overseas operations, especially in the rapidly-growing Asian economies.

” Tokyo-based Idemitsu is teaming up with state-run Kuwait Petroleum International (KPI), PetroVietnam, and Japanese partner Mitsui Chemicals Inc. to build the world-class refinery and petrochemical complex in Thanh Hoa Province, about 180 kilometers south of the Vietnamese capital of Hanoi, which will be capable of treating 200,000 barrels of Kuwaiti crude oil per day (bpd) when operational in 2017. The capacity would be doubled in the future if demand becomes high.
The facility will primarily churn out refined products such as LPG, gasoline, diesel, and jet fuel for the domestic market to be sold by PetroVietnam, and petrochemical products including paraxylene, benzene, and polypropylene for regional markets, which Idemitsu, KPI, and other partners have the right to export.


Idemitsu is the first Japanese refiner to build a plant in another Asian country.
According to Nakano, the Vietnam project fulfills its strategy aimed at business expansion through entry into growing overseas markets.
Idemitsu has decided to scrap the 120,000-bpd Tokuyama refinery in western Japan in March 2014 to cope with falling domestic oil demand.
In 2006, Idemitsu approached KPI’s parent company Kuwait Petroleum Corporation (KPC), which has a long-term “good business relationship” with the firm for decades, given that stable supply of crude oil to the facility is the key to success of the envisaged project.
KPI and Idemitsu each own a 35.1 percent stake in the joint project, with PetroVietnam and Mitsui Chemicals Inc. putting up 25.1 percent and 4.7 percent, respectively, in the joint venture launched in 2008.


Nakano downplayed the effects of a delay in the completion date, originally planned for 2014. “Construction cost has increased, but crude oil prices have been on an upward move these years, which generate benefits for us. So, there is no impact of the delay on overall project performance.”
State-run Kuwait Petroleum International (KPI) and its partners of a joint refinery project in Vietnam have resolved all outstanding issues with the Vietnamese government, including foreign currency guarantee, KPI President Hussain Esmaiel said Monday.
“We thank the Vietnamese government for showing the commitment to our refinery and petrochemical project by supporting essential requirement from co-lenders and sponsors,” Esmaiel told Kuwait News Agency (KUNA) in the Vietnamese capital.
Esmael is here with Kuwait Petroleum Corporation (KPC) Chief Executive Officer Farouk Al-Zanki after attending the signing on the previous day of an engineering, procurement and construction contract for the $9 billion project involving Kuwait, Vietnam and Japan.
Nghi Son Petrochemical Refinery Complex will be based in the northern province of Thanh Hoa, some 180 kilometers south of Hanoi.


The first phase of the state-of-the-art refinery will have an oil processing capacity of 200,000 barrels per day (bpd) when operational in 2017. The joint venture will possibly double the volume to 400,000 bpd after the project is expanded in the second phase.
According to KPI’s top official, the Vietnamese government has provided many facilitations for KPI and its joint venture partners, such as allowing the tax-free import of crude oil for the refinery and pledging to purchase all the petroleum products of the refinery. “This is part of the package that the Vietnamese government has provided us,” he said.


KPI established the joint venture in 2008 with PetroVietnam, Japan’s Idemitsu Kosan Co and Mitsui Chemicals Inc. It is Vietnam’s second refinery and the first one with foreign investors’ participation.
KPI and Idemitsu each own a 35.1 percent stake in the joint project, while PetroVietnam and Mitsui Chemicals Inc. hold 25.1 percent and 4.7 percent, respectively.
The joint venture has already launched syndication procedures of a co-financing arrangement with international and domestic banks, export credit agencies and multilateral agency, with completion of financial documentation expected within four months.
The final investment decision will be made after that, Esmaiel said. Up to $5 billion for the project will be received from such lenders as the government-backed Japan Bank for International Corporation, Nippon Export and Investment Insurance, Korean Bank for Import Export, the World-Bank unit International Finance Corporation.


KPI’s parent company KPC is to supply all the feedstock for the facility, which will also include petrochemical units, energy facilities, a pipeline and storage systems, along with information management systems.
It will primarily churn out refined products such as LPG, gasoline, diesel and jet fuel for the domestic market to be sold by PetroVietnam, and petrochemical products including paraxylene, benzene and polypropylene for the both Vietnamese and export markets, which KPI and other partners also have the right to sell.
Vietnam’s project comes as Kuwait has been pursuing downstream investments in China, including a planned refinery and petrochemical complex in the southern province of Guangdong with a refining capacity of 300,000 bpd.


“Building the refinery integrated with petrochemicals and marketing there is part of KPC’s expansion strategy,” said Esmaiel, highlighting the need to press ahead with the project. “We are working closely with our Chinese partners and foreign partner Total SA of France to reach an agreement with the Chinese side on the construction of the integrated complex,” he said, adding that the profit-earning petrochemicals part is inseparable from the refinery part.
Asked about a new joint project with South Korea’s SK Energy to develop a refinery and a petrochemicals complex in Indonesia, which is designed to refine Kuwaiti crude oil as much as 300,000 bpd, Esmaiel said the plan is at the early stage.
“We have embarked on a feasibility study on the project, and hopefully, by the end of the first quarter, we will be able to get results that our technical team will review and decide.”

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