Japanese refiner Idemitsu Kosan Co. and its partners have made a final investment decision on Vietnam's second oil refinery and secured $5 billion in project finance, Idemitsu said Wednesday.
The $9 billion Nghi Son complex 180 kilometers south of Hanoi will have a refining capacity of 200,000 bpd. It is slated to process Kuwaiti crude supplied exclusively by Kuwait Petroleum International.
Construction will begin in July and commercial operations are expected to start in the second quarter of 2017.
Idemitsu and Kuwait Petroleum each owns a 35.1% stake in the project. State-owned Vietnam Oil & Gas Group, known as Petrovietnam, and Mitsui Chemicals own 25.1% and 4.7%, respectively.
Petrovietnam will buy all oil products from Nghi Son at Asian market prices, as its output is primarily intended to meet the needs of Vietnam's domestic market. The joint-venture contract also allows it to export any excess production to avoid reducing the refinery's operating rate.
Nghi Son will produce 700,000 tpy of paraxylene, all of which Idemitsu and Mitsui Chemicals will take.
The project has been delayed several times -- the final investment decision was originally scheduled for the summer of 2010 -- as the partners struggled to obtain bank financing without underwriting by the Vietnamese government. Talks progressed rapidly, however, after the government agreed in August to take official and unofficial measures to minimize financial risks.