Vietnam’s sole oil refinery plans to borrow $1.2 billion for expansion

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An affiliate of state-owned oil group PetroVietnam is planning to borrow $1.2 billion to expand its refinery, Tran Ngoc Nguyen, head of the Binh Son Company, told VnExpress on Friday.

Nguyen said that the project to expand Dung Quat, Vietnam’s only oil refinery, will cost about $1.82 million, 70 percent of which must be raised from external sources.

“In December we will recruit a consultant to arrange funding for the $1.2 billion loan,” Nguyen said, adding that the group is open to both Vietnamese and foreign investors, as long as they offer a preferential interest rate.

Construction of the Dung Quat refinery started in 2005 and it started producing refined oil products for sale in 2010. The plant produces 6.5 million tons of crude oil each year, meeting about 30 percent of Vietnam's total demand.

The expansion, which is scheduled to finish in 2022, will raise the refinery’s capacity to 8.5 million tons per year.

PetroVietnam said in a document sent to the then Prime Minister Nguyen Tan Dung that from 2010 to the end of 2014, the refinery would have suffered a loss of VND27.6 trillion ($1.2 billion) if it had not been granted special tax incentives by the government.

Last year, Dung Quat reportedly made a profit of VND6 trillion ($270 million), but no information related to the amount of tax incentives it was given has been released.

However, Nguyen claimed that 2016 has been a good year for the refinery, with revenue expected to increase by 12.6 percent against last year.

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