Prime Minister: Nghi Son Oil Refinery needs more Vietnamese in its leadership

The Nghi Son Oil Refinery's Board of Directors is currently mainly foreigners, so the Prime Minister requested that more Vietnamese people participate and that a comprehensive restructuring is needed.

On the morning of November 11, Prime Minister Pham Minh Chinh visited Nghi Son Oil Refinery and Petrochemical Plant, one of the key projects in Nghi Son Economic Zone (Thanh Hoa) with a capital of 9 billion USD.

The factory, which holds one-third of the country’s petroleum supply, is facing many challenges. Externally, the market is changing unfavorably, the global energy transition trend has led to a sharp decline in refining margins, and revenue and profit have not met initial expectations. Internally, the factory’s management and operation have many shortcomings, and production has not been stable and cost-optimized.

According to the audited financial report, the company still has large accumulated losses, and although pre-tax profits have improved in recent years, they have not made significant changes. The Vietnam National Oil and Gas Group (PVN) is still making up for losses when the plant is in commercial operation.

Prime Minister Pham Minh Chinh visits Nghi Son Refinery and Petrochemical Plant on November 11. Photo: VGP

Faced with these issues, the Prime Minister assessed that when establishing, implementing and operating the project, the parties did not foresee all the difficulties that could occur, especially the recent fluctuations in the world situation. He requested a total restructuring of the project.

Regarding ownership structure, one of the issues raised is that the company and factory operate under a joint venture contract and joint venture charter, including a Board of Members and a Board of Directors mainly consisting of Japanese and Kuwaiti people.

Nghi Son Refinery and Petrochemical Plant is a joint venture project of 4 enterprises including Vietnam National Oil and Gas Group (PVN), Kuwait Petroleum International Company KPI, Idemitsu Kosan Company and Mitsui Chemicals Company.

Therefore, the Prime Minister said, the company and its capital contributors must work with PVN to restructure the management and personnel team as soon as possible. In particular, he requested that more Vietnamese people join the leadership board, promote decentralization and delegation of authority in operations to promptly resolve issues, build effective operating procedures and strengthen inspection.

The parties involved also need to carry out financial restructuring, for example, reducing loan interest rates, writing off interest and using capital effectively. Currently, the total disbursed capital for the project is 8.78 billion USD, of which the capital contributed by investors is more than 4.2 billion USD, and the capital borrowed from banks is more than 4.5 billion USD - accounting for a large proportion with high interest rates.

Finally, restructuring production and business (using national grid electricity at lower costs instead of high-cost oil-fired power generation (expected to save 70 million USD); reducing crude oil prices and diversifying crude oil sources; economical operation.

The Prime Minister requested the company to continue operating the factory to ensure absolute security, safety and environmental protection; to produce and supply the registered gasoline and oil sources. Local ministries and sectors also need to create favorable conditions for the project to operate.

General Director So Hasegawa acknowledged the issues the Prime Minister analyzed related to financial resources, administration and production. He said he would coordinate with all parties to implement the solutions pointed out by the Prime Minister, resolve difficulties and improve the situation in the coming years.

A day ago, the National Assembly agreed to spend more than VND9,650 billion to compensate for the purchase price of Nghi Son Refinery's products, but the Government needs to review the data.

According to the 2013 Government Guarantee Commitment (GGU) agreement, PVN will purchase all of Nghi Son's products at a wholesale price equivalent to the import price at the same time plus an import tax incentive of 3-5-7% (ie plus 3% for petrochemical products, 5% for LNG and 7% for petroleum products). Within 10 years (until 2028), if Vietnam reduces the import tax to a level lower than the above incentives, PVN will be responsible for compensating Nghi Son Refinery for the difference.

By the end of September 2023, the company had processed about 45.3 million tons of crude oil, produced about 36.82 million tons of various products, of which in the first 10 months of 2023, it produced 5.9 million tons of various products (reaching 83% of the annual plan). The total output of petroleum products that PVN has purchased is about 27.74 million tons.

Vnexpress.net