Petrochemical industry suffers from major setback

The global financial crisis and economic slowdown has dealt a severe blow to Vietnam’s plans to expand its petrochemical industry, according to the latest Vietnam Petrochemicals Report by research firm BMI.

Concerns have mounted over the strength of the markets the new petrochemicals complexes were designed to serve, while joint venture partners have struggled to secure multi-billion dollar financing they need.

In 2009, PetroVietnam was constructing a petrochemical complex in the Dung Quat economic zone, which was due to come online in Q110 with capacity to produce 260,000tpa propylene feedstock for a 150,000tpa PP plant.

The Nghi Son Refinery and Petrochemical complex is scheduled to come online in 2013 with capacities of 150,000tpa of propylene, benzene and PP each and 480,000tpa of paraxylene. Meanwhile, the Long Son project, which is backed by Siam Cement and PetroVietnam, has been delayed by at least two years to 2015. SP Chemicals has also cancelled plans for a US$1.5bn complex, including a cracker with ethylene capacity of 800,000tpa, citing unfavourable market and economic conditions.

There is still investor interest in Vietnam. Methanex is reportedly considering locating a 1.6mn tpa methanol plant in Ba Ria Vung Tau province. In November 2009, Siam Cement, Qatar Petroleum, PetroVietnam and Vinachem signed an agreement to build a US$3.5-4.0bn petrochemical complex in Vietnam.

PetroVietnam commenced propylene shipments from its newly commissioned oil refinery at Dung Quat in November 2009. The refinery is also designed to produce 150,000tpa of propylene, which PetroVietnam plans to sell to Marubeni until PetroVietnam builds a 150,000tpa polypropylene facility at the site, under a contract signed in 2008.

In September 2009, Taiwan’s Formosa Heavy Industries received an approval from the government to build a US$12.47bn petrochemical and oil refinery project in Vung Ang Economic Zone. The project is to have capacity of 300,000b/d of oil and 16mn tpa of petrochemicals. The company is constructing a US$7.9bn steel project in the same zone.

Nevertheless, the failure of petrochemicals projects has dealt a major blow to Vietnam’s industrialisation efforts. The complexes would supply key industries in the country, notably the automotive and consumer goods packaging sectors, as well as exporting products to other South East Asian markets.

The country’s per capita plastic consumption is also set to grow fast as a result of strong economic growth. The other concern is the impact of increased Asian petrochemicals capacities over 2009 and 2010 on product prices, particularly in a climate of slackening demand growth.

With little domestic petrochemicals activity, Vietnam is at the bottom of the Asia Petrochemicals Business Environment Rankings with 31.1 points, down 5.4 points since 2009. The deterioration in the country’s score is related to the cancellation and postponement of petrochemicals projects as well as negative risk associated with long-term external and financial factors.

Tags: Vietnam petrochemical industry