Qatar Petroleum's exit sets back Vietnam petrochem complex JV

Singapore

VIETNAM's integrated Long Son petrochemical complex is expected to face at least 12 months' delay in progressing towards a final investment decision (FID), with the imminent exit of project partner Qatar Petroleum to set back the financing for the over US$4 billion development.

The Business Times reported the Long Son petrochem complex was due for an FID in early 2016. This is likely to drag to late 2016, one source in Vietnam said, following Qatar Petroleum's expressed intent to forsake its 25 per cent stake in the project joint venture (JV) led by a unit of Thailand's Siam Cement Group (SCG).

SCG has sought a new joint-venture partner to replace Qatar Petroleum, but no progress has been reported to date. The JV was reported as having pooled together US$4.5 billion in paid-up capital for the petrochem complex, suggesting the new partner will need to fork out over US$1.1 billion for Qatar Petroleum's 25 per cent interest.

Qatar Petroleum signalled its intent to exit the Long Son JV after embarking on a restructuring exercise which its chief executive, Saad Sherida Kaabi, said will focus the state-owned national oil company's resources on upstream rather than downstream, or refining and distribution, businesses.

The Long Son petrochem JV, also comprising interests from Thailand Plastic Company and Vietnam National Oil & Gas Group, was looking to conclude an engineering, procurement and construction (EPC) tender along with a project FID this quarter.

This is a re-tender for the EPC contract and the JV is understood to be inclined towards seeking bid validity extensions from participating contractors, with the goal of awarding the contract at the earliest by end-2016.

The Business Times reported three key contenders were in the running for the EPC contract - Technip and SK E&C; Toyo Engineering and Lummus; as well as Daelim with KBR.

The successful contender will be commissioned to construct the 400-hectare petrochem complex next to the existing Long Son refinery in the Long Son Industrial Zone.

The first of its kind in Vietnam, the Long Son petrochem complex will substitute plastic resin imported to supply to textile factories and other domestic industrial users in the country.

The JV had planned to draw on either ethane to be supplied by PetroVietnam or naptha to be sourced through Qatar Petroleum to feed the petrochem complex, but the imminent exit of the latter may force the partners to look to the market for alternative sources.

The complex is designed to produce 1.65 million tons of olefins and 1.45 million tons of polyolefins annually. Some 50-60 per cent of Long Son's plastic resin output is intended to substitute imports while the remainder will be exported, according to one industry estimate.

Singapore ranked among the top suppliers of oil products to Vietnam, which imported 3.4 million tonnes of plastics in 2014, according to Platts.