British Embassy Hanoi
Construction begins on a $9bn oil refinery, Vietnam’s largest ever FDI project. What this reminds us about Vietnam: the need for long term engagement; the importance of working with East Asian investors; and the scale of the long-term opportunities in this challenging economy.
Several thousand people gathered in Thanh Hoa Province on 23 October to watch the ground-breaking ceremony for the Nghi Son Refinery Project (NSRP). With a total investment of over $9bn, this is the largest single foreign-invested project ever undertaken in Vietnam, a joint venture between PetroVietnam, Kuwait Petroleum International, Idemitsu and Mitsui Chemicals (both Japanese). Prime Minister Nguyen Tan Dung was joined by Kuwaiti Deputy Prime Minister and Minister for Oil Mustafa al Shamali and many other international investors, mostly from Japan and Korea.
The NSRP will be Vietnam’s second refinery – the first, Dung Quat, opened in 2009. Scheduled for completion in 2017, the NSRP will refine 200,000 barrels per day, which will meet 40% of Vietnam’s forecast domestic demand for petroleum products. This is a key strategic ambition for Vietnam, currently a net importer of refined products despite being a major exporter of crude oil.
Thanh Hoa Province took the opportunity to showcase its wider prospects with a large investment conference. It is Vietnam’s third most populous province, with a population of 3.4m – larger than Wales. The refinery is part of a much wider plan for economic growth, including new thermal power plants, a deep sea port and a $1bn Japanese-funded cement factory.
Although the first of its scale, the project reflects some key characteristics of the business environment in Vietnam. Long term engagement is vital. It is two decades since Prime Minister Vo Van Kiet first set out the strategic need for a refinery in the central region, and almost ten years since PetroVietnam approached lead sponsor Idemitsu.
Secondly, the project has been largely driven by East Asian investment, a key factor behind much of Vietnam’s economic growth, particularly in the areas of infrastructure development. Japan and Korea are major players. They often get the lion’s share of the contracts. But as Nghi Son shows, this does not rule out UK companies.
Thirdly, the Nghi Son refinery is hugely ambitious, as is Vietnam’s wider aspiration to become a fully industrialised economy by 2020. Despite the challenges facing the economy, this project is a reminder that the strategic ambition is undiminished. Opportunities here still command serious international attention.We must continue to work hard in the UK and in market to ensure that the undeniable challenges do not cause UK companies to overlook the wider emerging opportunities here, of which the NSRP is just one example.
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