Dung Quat refinery shuts down again with technical problem

The Dung Quat oil refinery, the country’s first, has been shut down for a second time due to a broken valve, again delaying its formal handover to the state-owned Vietnam Oil and Gas Group (PetroVietnam).

Building small refineries such as Dung Quat, which has a capacity of 6.5 million tons, is inefficient, according to PetroVietnam.

The group’s chairman, Dinh La Thang, said the refinery would restart January 16 after the valve in the residual fluid catalytic cracking unit is replaced, and become fully operational by the end of this month.

The plant was shut down for six weeks last year after its fluid catalytic cracker, which makes gasoline and other products, broke down on August 1 8.

It precluded the handover to PetroVietnam, the investor, by French contractor Technip, originally scheduled for last October.

Following the problem last year, the handover was rescheduled for February 25.

Thang said the new problem means the transfer would again be delayed.

But there would be no pressure on Technip, he said, adding he now expects the transfer to happen at the end of February.

The refinery, which started commercial production last February, will supply around a third of Vietnam’s fuel demand this year.

Too small

Vietnam has learnt a lesson from Dung Quat and will build larger and more efficient facilities in future, Vietnam News quoted Thang as saying Wednesday.

Building refineries with such a small capacity is inefficient, he said. Dung Quat has a capacity of 6.5 million tons.

“That is the lesson from Dung Quat,” he said, adding that two refineries that are now on the drawing board would have an annual capacity of 10 million tons.

Until the US$2.5 billion Dung Quat opened, fast-developing Vietnam imported all its refined petroleum needs.

PetroVietnam said Tuesday its revenues from last year accounted for 16 percent of the country’s GDP, down from 20 percent a year earlier, but did not report its profit figures.

Prices to edge up

PetroVietnam said it expects crude oil export prices this year to edge up to an average of $65 per barrel compared to $64 last year.

It expects export revenues to top $7.04 billion against $7.82 billion in 2009, the company reported on its website Wednesday.

The report also laid out production targets for this year, envisaging an output of 15 million tons of crude – or 301,000 barrels per day, 8 percent lower than last year – and 8 billion cubic meters of natural gas.

The lower targets were first proposed last November, with Thang blaming ageing oilfields for lower output.

Last year the company produced 16.3 million tons of crude oil, up 9 percent from 2008, and 8.01 billion cubic meters of gas, 7 percent higher than the previous year, the report said.

It exported 14.04 million tons of crude and sold another 2.25 million tons to Dung Quat.

Crude oil is Vietnam’s second-largest foreign exchange earner behind apparel.

PetroVietnam said it would supply 5 million tons of oil this year to the refinery, confirming an earlier report.

In 2010 the firm is set to expand exploration in Russia, Africa, the Americas, Eastern Europe, Central Asia, and Southeast Asia, the report said.

It has started work on the country’s second refinery, Nghi Son, in north central Thanh Hoa Province, and signed a contract to build the Long Son refinery, it said.

PetroVietnam will start construction of the $8 billion, 200,000-bpd Nghi Son plant this year and complete it in 2013, Reuters quoted an unnamed company official as saying last year.

Kuwait Petroleum International and Japan’s Idemitsu Kosan Co will each hold a 35.1 percent stake in the refinery.

Petrovietnam is also in talks with several foreign firms, including Saudi Aramco and a consortium of Malaysia’s Petronas, Abu Dhabi’s International Petroleum Investment Co, and oil trader Trafigura, to build the 200,000-bpd Long Son refinery.

VietNamNet/Thanh Nien

Tags: Dung Quat Refinery, Vietnam energy, Vietnam Petroleum