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Thursday , October 17 2019

Vietnam refinery disaster! – Losses to hit $2b by year end

Kamel Al-Harami Independent Oil Analyst

KPC welcomed and accepted the idea with full benefits of usage by the corporation in growing the market. It is a guaranteed secured outlet for Kuwait crude with more than 40 percent to be sold domestically and the rest of the products in the outside market. In no time, the necessary approval was obtained by KPC board and Supreme Petroleum Council (SPC).

The joint company was then formed with 35.1 percent shares each for KPC and Idemitsu, 4.7 percent for Mitsui and the remaining 25 percent for Petro Vietnam. Kuwait Petroleum International (Q8) was appointed to oversee the whole project of building the refinery with 200,000 barrels per day capacity at an estimated cost of $9 billion, financed by international banks including Japanese and Kuwaiti banks and to be completed by the end 2016.

It was delayed and in April 2017, it was handed over to the joint company. However, in May of the same year, the refinery manager and his team informed the owners that the refinery cannot be opened and consultation with an international firm was necessary to operate it because of many problems related to equipment, pipelines and configuration of refinery units.

By the end of 2017, a decision was made to appoint an international firm to run the newly built refinery at a cost of $ 300 million. Currently, the refinery is neither running at full capacity nor producing the products needed by the Vietnam market. It has been incurring losses that will reach more than $2 billion by the end of the year.

Now, it is facing shortage of cash and at the brink of bankruptcy. The three partners were requested to inject more cash. KPC and Idemitsu agreed, but Petro Vietnam refused to increase capital as it prefers to borrow from the market on the condition that investigations will be conducted to determine reasons behind such mishaps, mismanagement, all kinds of corruption, embezzlement and forgery. Many questions remain unanswered: Why it took so long to discover the mess and mismanagement despite the complaints made by the partners that seem to have fallen into deaf ears?

Why the Q8 senior officials or KPC high management did not pay attention to the complaints including their own staff in Vietnam, such that it ended in the grilling of the former oil minister?

Why did they ignore calls for internal investigation by members of the Parliament? Still, many questions remain unanswered. This is the responsibility of the new boards of KPC and Q8 – to investigate and appoint independent members to determine the main cause of this disastrous experience that is costing Kuwait more than $3 billion and its reputation, or was it a one-man show?!

Email: naftikuwaiti@yahoo.com
By Kamel Al-Harami Independent Oil Analyst

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