Idemitsu, Partners to Invest $9 Billion in Vietnam Refinery

Idemitsu Kosan Co., a Japanese refiner, and its partners plan to invest $9 billion in an oil refinery in Vietnam to meet rising demand in the southeast Asian country.

The companies expect to start construction in the second quarter of 2013 and commercial operation in 2017, Tokyo-based Idemitsu said in a statement. They have awarded engineering, procurement and construction contracts to a consortium formed by Chiyoda Corp., JGC Corp., Technip SA, GS Engineering & Construction Corp. and SK Engineering & Construction Co., according to the statement.

Idemitsu and its partners delayed deciding whether to build the Nghi Son plant, south of Hanoi, at least three times to resolve issues including how to finance the project. The plant, with a planned capacity of 200,000 barrels a day, will supply petroleum products in Vietnam, where demand has risen at an annual average rate of 8 percent in the past five years, Idemitsu said in the statement.

“It’s a positive move for Idemitsu to seek growth overseas” as the refining business in Japan is declining, Reiji Ogino, a Tokyo-based analyst at Mitsubishi UFJ Morgan Stanley, said by phone before the announcement.

Idemitsu and its partners will start the process for a $5 billion syndicated loan with banks and export credit agencies including the Japan Bank for International Cooperation, the company said in the statement. The companies expect to sign the financing agreement in the second quarter of 2013.

Political Risk

“Vietnam brought the project to us, and the country’s future depends on this deal,” Kenichi Matsui, Idemitsu’s vice president, told reporters in Tokyo, when asked about political risk in the southeast Asian country.

Idemitsu and Kuwait Petroleum International Ltd. each have a 35.1 percent stake in the Nghi Son project, while Vietnam Oil & Gas Group holds 25.1 percent. Mitsui Chemicals Inc. has a 4.7 percent interest.

The Nghi Son refinery will be Vietnam’s second. The Dung Quat refinery started operations in 2009.

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