Japan’s largest oil firm to take part in VN’s projects

Japan’s largest oil company, JX Holdings Inc., will take part in two oil refinery projects, with a combined capital of 800 billion JPY (roughly 9 billion USD), that the Vietnam Oil and Gas Group (PetroVietnam) is calling for investment from Japanese firms.

The two groups plan to set up a joint venture once the Vietnamese Government gives the green light, with such details as their respective stakes to be decided later, the Japanese daily of Nikkei reported.

As a first step, JX Holdings Inc. will take part in the expansion of a PetroVietnam-operated refinery in Dung Quat. The work is slated for completion by 2016 at a total cost of about 100 billion yen. The facility will have a daily refining capacity of about 170,000 barrels after the expansion.

The Japanese firm will also help PetroVietnam construct another refinery in the southern province of Ba Ria-Vung Tau. This facility is slated to begin operations in 2020, and the value of the project is estimated at 700 billion yen. It will be able to process about 200,000 barrels a day.

The two refineries will produce gasoline, chemical ingredients and other products mainly for the Vietnamese market, but a portion may be exported to other parts of Asia.

Earlier in late June, Chairman of JX Holdings Inc. Shinji Nishio told Chairman of the PetroVietnam Management Board Dinh La Thang, who was in Tokyo to call for Japanese investment in the group’s 28 projects, that his firm will invest in the two projects. This would mark the Japanese firm’s first time building or running a refinery overseas.

To realise the plan, JX Holdings Inc. and PetroVietnam will soon set up a study group to discuss bilateral cooperation. The Japanese firm will provide technologies for refining oil products from low-grade crude oil at low cost. It will also offer environmental technologies, such as methods to reduce carbon dioxide emissions and reduce sulfur content in oil.

According to the Nikkei, Japan’s demand for oil products fell below 200 million kiloliters for the first time in 22 years in fiscal 2009 and is expected to continue shrinking at a rate of more than three percent a year.

JX Holdings Inc. has decided to slash its refining capacity by about 30 percent to address the declining demand. Meanwhile, Vietnam’s domestic demand is currently about 10 percent of Japan’s and projected to double by 2020. That is why JX Holdings Inc. hopes to secure sources of profit by moving quickly into that market.

Tags: JX Holdings