Can Tho oil refinery stalled yet again

Can Tho City’s authorities have become anxious about the implementation of the Can Tho oil refinery project. It seems that the investor, of Vien Dong Investment and Trade Company, has made no move toward implementing the project in over two years.

“Sometimes investors do not have to have capital, the most important thing they need to have is idea,” Nguyen Van Duc, General Director of Vien Dong Investment and Trade Company.

At the meeting with government agencies last week the investor of Can Tho oil refinery project tried to justify the lack of progress. It seems that the main activity of Vien Dong in the last two years was to seek partners, or, in other words, seek new sources of capital in order to implement the project.

Tran Thanh Can, Deputy Director of the Can Tho Planning and Investment Department admitted: “I feel anxious about the investment capital for the project”.

The project on Can Tho oil refinery was put forward in 2004. In 2005, the Government allowed the investor to draw up detailed project for submission to competent agencies. In May 2008, the Can Tho City’s People’s Committee granted the investment license to the project.

As proposed, the oil refinery is expected to be located in Phuoc Thoi ward in O Mon district in Can Tho. Once operational, the oil refinery will have the capacity of two million tonnes of crude oil a year. The total investment capital of the project is $538 million, of which Vien Dong contributes 161.4 million, or 30 percent of the total capital, while the other 70 percent would be invested by the US Semtech Limited.

However, in July 2009, the investor of the project asked for permission from the city’s authorities to reduce the area for the project from 250 hectares to 50 hectares and reduce the investment capital from $538 million to $350 million. The investor said that there would be some changes with the technology of the oil refinery which were made after the investor made a trip to China.

In early November 2009, Vien Dong told the local authorities that Semtech had difficulties in capital arrangement. According to Duc, just one month after getting the investment license, the world’s crude oil market fluctuated heavily. The crude oil price escalated from $67 per barrel in June 2008 to $147 in late 2008, resulting in the bankruptcy of a series of US enterprises.

In December 2008, Chairman of Semtech died unexpectedly, which put more difficulties for Semtech. They quickly allowed Vien Dong to seek other partners for the Can Tho Oil refinery project.

As such, Vien Dong has decided to join forces with Hoa Viet and a subsidiary of the group to implement the project which has become a 100 percent domestic owned project.

Though Vien Dong has committed to contribute 30 percent of the capital in cash, it has to borrow the sum of money. Therefore, the Ministry of Planning and Investment, following the instruction by the Government, has decided to establish an inspection team to clarify the issues surrounding the project.

After changing partners, Vien Dong said that the contractor of the project, Chinese Sumec Company would lend 80 percent of the investment capital at the interest rate of five percent per annum, which the investor can pay within five years, while the contractor does not demand the guarantee from the Government of Vietnam.

However, according to the Can Tho Planning and Investment Department, to date, the department still cannot see any signs of new capital sources. It said that if the investor cannot prove the feasibility of the capital arrangement by the end of June 2010, the investment license of the project will be revoked.

According to Can, even if Vien Dong withdraws from the investment project, Can Tho oil refinery will still be implemented by other investors.

Thoi bao Kinh te Saigon

Tags: Can Tho oil refinery, Vietnam Oil Refinery