- News in Vietnam
- 15 February 2022
What does PVN say about the risk of shutting down the Nghi Son Refinery?
On January 26, the Vietnam Oil and Gas Group (PVN) issued a statement clarifying information about Nghi Son Refining and Petrochemical Company Limited (NSRP) announcing to stop operating on February 13.
Previously, on January 19, 2022, NSRP issued Official Letter No. 126/NSRP- HPR to the Secretary of the Provincial Party Committee, Chairman of Thanh Hoa Provincial People’s Committee, informing that NSRP had to cancel the import of 2 crude oil tankers in January 2022, must reduce capacity down to 80% and will have to shut down on February 13 completely, 2022 if the financial situation does not improve.
According to the content of this dispatch, NSRP is facing severe financial difficulties because PVN has not yet approved the extension of the Crude Oil Payment Support Agreement (RPA) and the Fuel Product Offtake Agreement. (FPOA) between PVN and NSRP.
Responding to this issue, PVN affirmed that as the host country, PVN has comprehensively fulfilled its commitments and has continuously made many documents and comments to promote its progress. Nghi Son Oil Refinery, improving management and administration to increase NSRP’s operational efficiency.
However, because Nghi Son Oil Refinery was put into commercial operation in the context of the worldwide trend of strong energy source movement (renewable energy, replacing internal combustion engines with electric motors, so that decrease in demand for gasoline), adverse market fluctuations, a sharp drop in the processing profit margin of the oil refining industry and the impact of the COVID-19 epidemic have greatly affected the plant’s the production and business efficiency.
Besides, there are many shortcomings in the governance of NSRP, which is operated by foreign parties, contributing to NSRP’s current financial difficulties. Therefore, the overall restructuring of NSRP is a necessary and urgent need. Currently, PVN is in the negotiation phase with foreign capital contributors on the content of the comprehensive restructuring of NSRP to maintain the safe and effective operation of the Company as well as ensure the interests of PVN and the Vietnamese side.
PVN also pointed out that, according to the Company’s Charter, NSRP’s Board of Management is responsible for the efficiency of production and business activities, including the import of crude oil and the Plant’s operating capacity. NSRP’s voluntary cancellation of essence two crude oil shipments leading to the risk of shutting down the Plant is entirely within the responsibility of the NSRP Executive Board, not related to the approval of RPA and FPOA extension. These renewal issues are part of the NSRP’s overall restructuring plan and are under negotiation.
Nghi Son Refining and Petrochemical Company Limited (NSRP) is a joint venture company established in April 2008 by four capital contributors, including Vietnam Oil and Gas Group (PETRO VIETNAM), Co. Kuwait (KPE), Idemisui Kosan Company of Japan (IKC), and Mitsui Chemical Company of Japan (MCI), of which PETRO VIETNAM contributes 25.1%.
Nghi Son Refinery and Petrochemical Complex Project (Project) officially went into commercial operation on November 14, 2018, and has been approved by the State Council for acceptance test results in writing from the Investor. Up to now, Nghi Son Refinery and Petrochemical Plant are operating relatively stably, producing and selling products that meet market requirements.
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