Vietnam's very first oil refinery was official inaugurated on Sunday February 23, ending the country's complete and utter reliance on imported fuel – costing it hundreds of millions of dollars every year.

The 140,000 barrel per day (bpd) Dung Quat plant has been held-up by delays, failed joint ventures and strong criticism of its location throughout its build.

The plant's completion, according to Tran Ngoc Canh, CEO of PetroVietnam, signals “a symbol of socialism in Vietnam's 'doi moi' reform era.” More importantly however, on an economic basis, it means that Asia's second-largest auto-fuel purchaser – who has considerable offshore oil reserves – will be cutting its imports by as much as a third.

The Quang Dang refinery, which was first conceived of 15-years-ago, cost the Vietnamese government more than $2.5 billion. The complex was built by an international consortium led by French oil services group Technip. The initial estimated project cost was significantly lower at $1.5 billion.

To put it into perspective, Vietnam spent $10.88 billion on importing refined products last year, while exporting $10.45 billion of crude oil.

The new facility will be financed, and run, by state-owned oil and gas monopoly PetroVietnam and is expected to produce an output of 6.5 million tonnes per annum - equivalent to 140,000 bpd. It is anticipated that the refinery, situated in the central Quang Ngai province, will be running at its full potential – of 6.5 million tonnes a year – by August.

Initially the refinery is only outfitted to process Vietnam’s benchmark Bach Ho Light sweet crude oil – whose offshore deposits are expected to run dry in less than ten years.

Looking forward, Dinh La Thang, Chairman of PetroVietnam, said that the company will be investing in two more refineries over the next six years - one in both the north, and the south of the country. The completion of each proposed facility would contribute an additional 10 million tonnes of crude oil per annum.

Brining about a paradigm shift in its energy strategy the Vietnamese government has set itself a target to be self-sufficiency in fuel by the year 2015. For a country of 86 million people, the timeline for such a project appears rather ambitious.

PetroVietnam also hopes to install a $1 billion desulphurising unit by 2013. In a remarkable move to generate additional revenue for the project and the state-run owner is already in talks with several foreign oil giants including Royal Dutch Shell, India’s Essar, and South Korea’s SK Energy, to upgrade and sell part of the refinery

Tags: PetroVietnam