Foreign investors have delayed or cancelled multi-billion-dollar oil refinery projects in Vietnam partially due to the concern of the slump in global oil prices.

The southern central province of Binh Dinh's authorities recently agreed to cancel the investment licence for a USD20-billion petrochemical project in Nhon Hoi Economic Zone due to its long delay in implementation.

The project was initially estimated at nearly USD29 billion in 2013 by Thailand’s state-owned oil and gas giant PTT, but was reduced to USD22 billion. PTT and Saudi Arabian Oil Company each would contribute a 40% while a Vietnamese partner would contribute the remaining 20%.

Foreign investors have delayed or cancelled multi-billion-dollar oil refinery projects in Vietnam partially due to the concern of the slump in global oil prices (Illustrative photo)

The project was scheduled to be started this year and completed in 2021. Local authorities pledged to create favourable conditions for the completion and implementation of the project; however, the investors tried to delay the application for an investment certificate.

In June this year, PTT announced it would delay the project due to worries about the global oil market, saying that it would go ahead with the investment at the end of the year.

However, Binh Dinh Province's authorities disagreed with PTT's proposal and decide to cancel the investment licence.

Russia’s Gazprom Neft Public Joint Stock Company has also decided to give up its plans to purchase 49% of PetroVietnam's stake in the Dung Quat Oil Refinery being developed by the Binh Son Refining and Petrochemical (BSR) Company Limited in the central province of Quang Ngai.

According to some sources, both sides failed to reach common ground on issues concerning corporate evaluation and capital contribution in the negotiation process. BSR’s debts were also an issue, given low global oil prices.

Meanwhile, Qatar Petroleum also pulled out of the USD4 billion Long Son petrochemical project in the southern province of Ba Ria-Vung Tau Province.

Professor Nguyen Mai, Chairman of the Vietnam Association of Foreign-Invested Enterprises, said he supported the withdrawal of these oil refinery projects.

Mai explained that Vietnam should not licence more refinery projects as the total designed capacity of 65 million tonnes of the country's current refinery plants was enough to meet local demand.  If the existing projects are expanded in the 2020-2030 period, fuel oversupply would not be avoided.

Mai suggested that Vietnam should prioritise environmentally-friendly projects instead of refinery projects.