Tuesday, February 10, 2015

[VNA] Falling oil price and impacts on Vietnam’s economy

The sharp decrease in world oil price over the past three months is expected to affect Vietnam’s oil export earnings as well as a wide range of socio-economic aspects.
As the budget revenue estimate for 2015 was calculated based on the oil price of around 100 USD per barrel, the Government recently had to convene a meeting to discuss ways to respond to this trend.
The meeting agreed that with the low world price, it is inevitable that the country would have to reduce output and even suspend production at some wells where pumping cost is high.

Friday, January 23, 2015

Dung Quat Refinery expansion plan fixed at 8.5 mln tons of crude and investment of USD 1.82 billion

After much study and calibration, the ambitious plan to expand and upgrade the Dung Quat oil refinery based in Dung Quat Economic Zone of central coastal Quang Ngai province has been eventually fixed and ratified by an Investment Certificate issued by the local government. The target capacity is announced to be 8.5 million tons of crude per year (192,000 barrels per day),  lower than the figure of 10 million tons as tentatively publicized previously. The total cost for this plan is said to be roughly 1.81 billion USD, 30% of which shall be contributed by the involved partner(s) and the remaining 70% shall comes from loans, according to a news article from PVN/BSR.

A ceremony was organized on 23rd Jan 2015 at Dungquat EZ to officially announce the expansion project.

Thursday, November 6, 2014

Dungquat’s refinery upgrade and expansion plan estimated to cost $2 billion

PetroVietnam Deputy General Director Le Manh Hung acknowledged during a recent meeting with the Authority of Quang Ngai, where the Dungquat refinery is located, that the plan to upgrade and expand this refinery shall be kicked off in Q.1 2015, clear site should be available in Q2 2016, and construction will commence in Q.3 2017 and expectedly complete in 2021.

The upgrade and expansion plan is estimated to cost between 1.8 to 2 billion USD and shall raise the refinery’s annual capacity from the current 6.5 million tons of crude oil to 10 million tons.

Surroundings of the current refinery

Friday, September 19, 2014

JFE discontinues plan for steelworks in Vietnam

In  a press release made on its website, JFE has officially announced its decision to quit involvement in the Guang Lian Steel project located in Dung Quat Economic Zone, Quang Ngai province, leaving E-United Group alone with the project.

The press release did not reveal the reasons for JFE Steel’s discontinuing the participation in the project; however, insiders tend to link this leaving decision to the fact of unapproved investment incentives and the fierce competitions from giant steel mills under construction in Vietnam and in the region.  The situation raises the questions over whether E-United Group would go on with the project and how it would arrange the finance to feed this big steelwork.

Source from Dungquat Economic Zone Authority was quoted as saying that if the investor wants to move on, it has to pledge to follow a clear construction road map otherwise the province would consider revoke the investment certificate, recover the allocated land, and pay back to the investor what it has spent legitimately.

In a report by local authority addressed to the government late 2012, the disbursed investment capital of the project was said to be valued at around $ 50 million then as declared by the investor.

While the 9.9 billion Formosa steel project is on its good progress in north central Ha Tinh province, it’s not clear to outsiders which path  the Guang Lian project is heading to.

Related News:
Guang Lian Steel Project in Dung Quat: in the balancing art of "give-and-take"

Wednesday, September 17, 2014

SCIC told to invest in Thai Nguyen steel project

HANOI – The Government has asked the State Capital Investment Corporation (SCIC) to pour capital in Thai Nguyen steel expansion project’s second phase, and urged banks to restructure debts to ease difficulties for the project owner.

According to the Prime Minister’s instructions, the project invested by Thai Nguyen Iron and Steel Corporation (TISCO) and still remaining uncompleted after seven years will continue to be implemented as proposed by the Ministry of Industry and Trade.

Friday, September 12, 2014

Vung Ro - the third refinery project in Vietnam kicks off

Vietnam has begun construction of Vung Ro oil refinery and petrochemical project in Phu Yen province in the Southern Central Coast of Vietnam. The project, which has an investment of nearly $3.2 billion, is designed to have a capacity of refining 8 million tons of crude per year, and cover an area of 538 hectares, including the area to develop a supporting seaport, according to the Vietnam News Agency.

Groundbreaking Ceremony of Vung Ro Refinery & Petrochemical Project in the south central coast province Phu Yen.

The refinery configuration allows producing fuel products of high quality (LPG, Gasoline RON 92/95, Jet Fuel, Diesel, Fuel Oil) and petrochemical products (Benzene, Toluene, Mixed Xylene, Polypropylene). The products are said to satisfy both current Vietnam specifications and international standards.

Product Slates
VRP Blend (Yield, TPA)
Arabian Light (Yield, TPA)
Gasoline RON 92/95
Jet Fuel
Fuel Oil
Mixed Xylenes

Source: VRP website

Upon completion, the refinery is expected to create around 1,300 jobs, not to mentioned around 15,000 headcounts shall involve in the construction period and around US$ 110 million of various taxes shall be paid per annum.

General layout of Vung Ro Refinery & Petrochemical Complex. Source: VRP
This is the third refinery project launched in Vietnam, after the Dungquat refinery operating since 2009 and the Nghi Son refinery being now under construction. The latest news from Binh Dinh Province Authority on 11th Sept 2014 also revealed that detailed ffeasibilitystudy for the US$ 22 billion refinery project of 400,000 bpd has been submitted to Vietnam Ministry of  Industry and Trade for consideration. This project is invested by Thailand-based PTT Group and Saudi Aramco Group and is expected to be joined by other partners.

Under the circumstances of several refineries to come on stream in the next few years, including the fact that the current Dung Quat refinery is working on upgrade and expansion plan, experts foresee the situation of fuel supply exceeding domestic demand; then there’s a high possibility that Vietnam would become a petroleum exporter in the future. 

Tuesday, September 9, 2014

Guang Lian Steel Project in Dung Quat: in the balancing art of "give-and-take"

Various news sources recently reported that authorities allowed corporate income tax rate of 10% to be applicable for only 15 years, instead of for the project's whole lifetime (nearly 69 years) as petitioned by by JFE Steel Corporation (Japan) regarding their tentative investment in the current Guang Lian steel mill project located in Dungquat Economic Zone in Quang Ngai province. This is one of petitioned-but-rejected incentive proposals made by the investor who is found to be in the dilemma of whether to going ahead with the project.

A rescuing hand for a steel mill in stagnancy?

Licensed in 2006, the sole investor for that giant project had been initially Tycoons Group (Taiwan), later joined another Taiwanese investor - E-United who became the majority stakeholder then, resulting in the increase of registered capital to $3 billion and changing the project name into Guang Lian Steel Mill. A commencement ceremony was organized in October 2007, followed by the construction of some civil works and ground piping, then all execution started to suspend since 2010 end until now. After 7 years of commencement, the project remains in a stagnant situation which has been raising much debates among related parties.

Early 2012, JFE expressed its intention to participating in the project, in the form of purchasing controlling stakes in the owners-fluctuating project to become the majority stakeholder (or the real owner), then raising the mill's capacity, changing the configurations to manufacture other types of steel products, and raising the project capital to $4.5 billion. According to its initial plan, the final decision on investment would be made in early 2013, to be followed by application for investment certificate amendment and construction kick-off in July 2013. However, this plan has not been materialized. A new plan was proposed for July 2014, and seems to be missed again.

Give-and-take dilemma

The JFE's participation is expected by local authorities to be the rescuing hand for the long stagnant steel mill project which is now leaving hundreds hectares of land in waste in dim hope. That's what JFE really means to the local community. However, the investor as normal is also keen on benefiting something from the local investment environment. "If, by the end of this year [2012], the study reaches a favorable conclusion, including the feasibility of developing required infrastructure and the availability of incentives, JFE Steel expects to partner with the E United Group to launch a steel-production operation in Vietnam", read a press release announced by JFE Steel in March 2012. 

After great efforts to make a pre-feasibility study available, in 2013, JFE wrote to the authorities to ask for additional incentives such as the allocation of 210 hectares of land and waters to increase the total project area to more than 700 hectares. The Japanese investor also insisted to ensure adequate water supply of 200,000 m3 per day, connecting  its electricity system to the national power grid, and especially the very preferential enterprise income tax for the entire project ..., stated by various reports by local government.

Most of the requirements on infrastructure seemed to get nod from the local government (Dung Quat Economic Zone Authority and Quang Ngai Provincial People's Committee). Quang Ngai Authorities was said to agree in principle to allocate additional 185 hectares of land, adjusting the master plan of Dungquat port complex No. 1 to arrange water area for extra terminals serving the steel mill, coordinating with water and power suppliers (both private and state-owned) to secure the utilities for this power-consuming project. 

Balancing art needs the balance.

However, the financial incentives prospects have been reportedly cashed dim light over the fate of the project. The investor petitioned to enjoy the preferable corporate income tax (CIT) rate of 10% applicable for the whole project lifetime (including for the expanded capacity when raising the investment capital from $3 billion to $ 4.5 billion); however, CIT rate of 10% was tentatively  approved to be applied for only the first 15 years for the expanded capacity, VOV quoted a representative from Quang Ngai authority as saying in July 2014. The source also revealed that the proposals of state budget covering the expenses of additional land compensation and port channel dredging was also turned down by the government, that means, the investor would have to handle these works at their own cost, if he wished to proceed with.

Which or what way to go?

Under such circumstances, it's not difficult to imagine how JFE is in the dilema of "give-and-take" when setting up their presence in Vietnam. At the end of 2012, Eiji Hayashida, president of JFE Steel was quoted as saying about JFE's plan for pouring capital to steel mill project in Dung Quat, “Things won’t go smoothly until we make sure that we’ll beat the competition as many projects are being lined up to build new mills in southern China and Vietnam.”, and “We initially said a conclusion will be reached by the end of this year [2012], but we’ll need a bit more time,” said in an interview 05 Dec 2012 at the company’s Tokyo headquarters. And it seems to outsiders that it's now late 2014 and even more time shall be needed.

Thursday, September 4, 2014

Vietnam ranks 68th, up two, in global competitiveness report 2014-2015

While the region of Asia and Pacific is home to three of the 10 most competitive economies in the world: Singapore, Japan, and Hong Kong SAR and a further three economies are featured in the top 20; Vietnam advances 2 places to the rank of 68th out of 144 in the list, according to the Global Competitiveness Report 2014-2015 released by World Economic Forum. Vietnam is among the five largest Southeast Asian economies (ASEAN-5) featuring in the top half of the rankings, and making strides in the edition for 2014-2015. 

Steady improvement in the macro economy, public institution and labor market 

At the rank of 68th, Vietnam’s performance remained almost unchanged from the past 2 years (70/144 for the 2012-2013 and 2013-2014). Following an experience of high inflation in 2011, the country’s macroeconomic situation continues to improve (75th, up 12 positions), as inflation declined to 6.6 percent. Institutions pillar also receive a better assessment (92th, up six), on the basis of better property rights protection and improved efficiency. 

Comparison of the 12 GCI Pillars between Vietnam and Emerging & Development Asia. Source: World Economic Forum

According to WEF’s definition, the institutional environment is determined by the legal and administrative framework within which individuals, firms, and governments interact to generate wealth. The importance of a sound and fair institutional environment has become all the more apparent during the recent economic and financial crisis and is especially crucial for further solidifying the fragile recovery, given the increasing role played by the state at the international level and for the economies of many countries. 

In a region where many countries have poorly functioning labor markets, Vietnam ranks a satisfactory 49th, its best showing among the 12 pillars combined to determine the competitiveness index, especially thanks to the “pay and productivity” aspect ranking 23rd. The highest ranking pillar for Vietnam is the market size (34th). The quality of transport and energy infrastructures also improves slightly. 

Much concerns over access to financing and low readiness for technology 

Vietnam’s financial sector and its banks remain vulnerable. Technological readiness remains low (99th, up three). The country’s businesses are especially slow in adopting the latest technologies (with technology readiness ranking 99th) thus forfeiting significant productivity gains through technological transfer. The degree of business sophistication is low (106th, down eight), with companies typically operating toward the bottom of the value chain (nature of competitive advantage and value chain breadth rank extremely low at 128th, 112th respectively). 

Vietnam's GCI for 2014-2015. Source: World Economic Forum

The report also lists the most problematic factors for doing business in Vietnam, based on the opinions of respondents. Of major concerns are the factors of, among others, access to financing, inadequate educated workforce and policy instability.

Sunday, August 31, 2014

150,000 DWT oil tanker accesses Dungquat SPM

According to news released by PVN, on 23rd August 2014, Binh Son Refining and Petrochemical Company Limited (BSR) successfully received crude oil tanker of 150,000 DWT to import 1 million barrels of AZERI crude oil from Azerbaijan through the Single Point Mooring (SPM) system of Dung Quat Oil Refinery. This is the biggest first-ever oil tanker accessing this facility after 5 years of operation; in the past, only tankers of up to 110,000 DWT could visit here.

During the 2nd overall maintenance of the refinery which lasted 57 days, nearly 7,000 items were done with the involvement of 3,400 professional staffs of BSR, contractors, partners. It was divided into 5 main packages, notably the the package 4 was implemented by BSR themselves including the maintenance of rotating equipment, electrical equipment, automation equipment, a number of simple static devices and oil pipelines. Meanwhile, the repair of defects for thermal expansion joints EX-101 in RFCC workshop was conducted by Technip/JGC contractor (EPC contractor of Dung Quat Oil Refinery Plant) and connection of awaiting ends for SRU 2 project was implemented by JGC contractor.
The first 150,000 DWT Oil Tanker at Dungquat SPM. Photo courtesy: PVN

Following the successful maintenance and upgrading of single-point mooring buoy, BSR imported the first crude oil from tanker of 150,000 DWT instead of 110,000 DWT previously. At transformation cost of US$ 300,000 only, SPM system has been improved to receive crude oil vessels of double capacity from Aframax vessel size (80,000 - 110,000 DWT) to Suezmax vessel size (150,000 DWT). Currently, BSR is capable of receiving crude oil from different regions of the world such as West Africa, the Mediterranean ... to help diversify sources of crude oil for processing at Dung Quat Oil Refinery, improving efficiency, reducing production costs and saving USD 10-15 million .

It was the 398th crude oil vessel received BSR through this SPM since the plant was put into operation in 2009, with totally 31,288,140 million tons of crude oil handled, approximately 27,985,737 tons of products refined.

Wednesday, August 27, 2014

SOE equalization to fuel M&A activity

Experts forecast equitizing hundreds of State-owned enterprises (SOEs) between now and next year as ordered by the Government will lead to stronger merger and acquisition (M&A) activity in Vietnam, the Saigon Times Daily reported on August 12.
The M&A activity is also expected to accelerated by the fact that State business groups and corporations required to divest from non-core business areas (mostly including banking, real estate and securities investments) to focus on their respective core industries.  Thanks to that, SOEs will provide the market with a huge amount of capital via their divestments of non-core investments and equitation, and these are great opportunities for investors.
Sam Yoshida, senior managing director of Recof, an M&A consulting firm in Japan, was cited by the Saigon Daily as saying that more investors from this Northeastern Asian country in are keen on the Vietnamese market thanks to low labour cost, a plentiful supply of labour, political stability and great potential for growth.
It is expected that the target for 432 SOEs to go public by the end of 2015 is possible as the pace of SOE equalization in the past seven months of this year was fast, according to the Steering Committee for Enterprise Reform and Development. In the January-July period, State corporations and groups divested a total of 2.975 trillion VND, three times higher than that of last year, but the divestment process remained slow. There have been 76 enterprises restructured in the year to date, with 55 equitized, two dissolved, one sold, 15 merged and three filing for bankruptcy.
As of last month, the Prime Minister had approved the restructuring plans of 20 State groups and corporations, including Vietnam National Textile and Garment Group (Vinatex) which is scheduled to offer its initial public offering (IPO) on the Hochiminh Stock Exchange (HOSE) in September this year.
According to Vinatex’s equalization plan approved by the Government, the group has total chartered capital of 5 trillion VND. After the group goes public, the State will retain a 51% stake while 24% will be offered to strategic investors, 24.4% put up for auction and 0.6% sold to employees.
Another State corporation, Vietnam Airlines, is proceeding with a plan to launch an IPO later this year and sell shares to strategic investors around the end of this year. According to Decision by Minister of Transport, the value of holding company Vietnam Airlines was more than 57.1 trillion VND (over 2.7 billion USD) as of March 31 last year, with State capital making up more than 10.5 trillion VND. Vietnam Airlines wants to sell 25 percent of its chartered capital to investors at the IPO. Later, the State shares at this corporation will gradually lower to 65%.
Compiled from VNA & Saigon Daily

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