Vietnam strives toward fuel self-sufficiency as Australian fund aids refinery expansion

Vietnam is taking small but consistent steps toward achieving liquid fuel self-sufficiency as foreign investors continue to support the country's petroleum refining sector, with the latest influx of Australian capital expected to contribute to boosting oil product output capability over the next few years, industry and government sources said March 1-5.

Australia's Acuity Funding has recently committed to lending $720 million to Nam Song Hau Oil and Gas Investment Trading Joint Stock Company, also known as NSH Petro, to implement various petroleum development projects. A signing ceremony between the two sides was held Feb. 27 in the Vietnamese Mekong province of Hau Giang.

Foreign funds and investors helped Vietnam more than double domestic fuel production capability over the past decade and they are keen to support the local refining industry. Vietnam is one of Asia's fastest growing economies and its oil demand must be backed up by healthy domestic fuel production capacity, an official at the Ministry of Industry and Trade and a fuel distribution network manager at state-run PetroVietnam told S&P Global Commodity Insights this week.

Acuity Funding indicated that multiple credit financing packages will be deployed in the first quarter of 2024, thereby opening up new and stronger development opportunities for NSH Petro.

The funding will allow NSH Petro to upgrade and expand existing facilities, as well as build various new projects, according to Ranjit Thambyrajah, managing director of the Australian investment company.

Acuity Funding will provide $290 million for NSH Petro in the first phase to expand three projects in the Mekong Delta localities of Hau Giang, Tien Giang and Can Tho.

In the second phase, the Australian fund will provide NSH Petro another $430 million to upgrade a condensate processing plant in Can Tho, increase working capital, and complete mixed-use projects in Hau Giang province and Can Tho city. The 500,000 mt/year (around 10,400 b/d) plant has been approved by the Vietnamese government for commissioning during 2021-2030.

Another $60 million will also be provided to upgrade the 250,000 mt/year Nam Viet condensate processing plant in Can Tho city, which began production in 2016.

Acuity Funding will also provide $190 million for a storage facility and a gasoline mixture plant in Hau Giang, which are under construction.

Hefty net imports

Vietnam, with a population of close to 100 million, has a total refining capacity of around 350,000 b/d, which is only enough to cover around half of the country's oil product and chemical demand.

As a result, Vietnam still needs to depend heavily on imports for consumer and industrial fuels, at least until the country can achieve total domestic refining capacity of minimum 600,000 b/d, industry sources and traders said this week.

Vietnam imported a total 75.4 million barrels of oil products in 2023, up 13% from 2022, data from Vietnam customs showed.

The Southeast Asian nation has been relying heavily on South Korea and Singapore for various transportation and industrial fuels as well as petrochemical products over the past couple of decades. Oil product shipments from South Korea totaled 29.4 million barrels in 2023 and 16.3 million barrels from Singapore, customs data showed.

Still, Vietnam has been making steady and gradual progress in increasing its refining capacity and oil product production capability over the past several years.

The Nghi Son refining complex started operations in 2018 and the 200,000 b/d refinery in central Vietnam played a key role in significantly boosting domestic fuel production capacity, a source at the refinery's major foreign stakeholder told S&P Global.

PetroVietnam holds 25.1% equity in the refinery and foreign stakeholders include Kuwait Petroleum International with a 35.1% stake, Japan's Idemitsu Kosan with 35.1% and Mitsui Chemicals with 4.7%.

Vietnam's Ministry of Industry and Trade has allocated a total minimum petroleum supply of almost 685,000 cu m or around 4.3 million barrels to NSH Petro, of which gasoline makes up over 2.9 million barrels and diesel accounts for around 1.38 million barrels, according to Mai Van Huy, chairman of the board of directors of NSH Petro.

NHS Petro is a leading petroleum company in Vietnam and, as such, is responsible for ensuring supply of petroleum to the Mekong Delta provinces, maintaining the nation's energy security and meeting its consumption needs, Acuity Funding said.