VietNamNet Bridge – The Phu Yen provincial authorities have asked relevant ministries to propose the government to apply the zero percent export tariff to the petrochemical and sulphur products to be churned out by the Vung Ro oil refinery. Prior to that, similar preferences have been granted to the Nghi Son petrochemical project.

The coast of Phu Yen.

According to the Phu Yen provincial people’s committee, it wants the preferences because petrochemical and sulphur products are the ones that account for a high proportion of the total investment capital of the whole project.

In November 2012, the Vung Ro Oil and Gas Company Ltd once asked for the permission to enjoy the zero export tax rate for the during the whole life of the project.

However, the Prime Minister, in reply in the Document No 204/TTg-KTN, only agreed to the zero export tax rate on oil refinery products. Meanwhile, petrochemical products were not subject to the preferential export tax.

The Prime Minister, at a working session with the Phu Yen provincial authorities recently, asked the Ministries of Finance, Planning and Investment, and Industry and Trade to consider the tax rates on the products of the project and submit to the government in May 2013.

Dau tu newspaper has quoted a manager of the Vung Ro Oil Refinery Company Ltd as saying that it is very likely that the project would enjoy the zero tax rate for the immediate time and the next years. However, what the investor wants is the long term and stable tax incentives, because the project is expected to last 30 years.

He went on to say that the investors need to be informed about the preferences they can enjoy to draw up their investment plans and calculate the production costs. Meanwhile, lending institutions also need to clarify the preferences and the prospects of the project to decide whether to provide loans.

When insisting on the tax incentives, the Phu Yen provincial authorities and the investor emphasized that a similar preference has been given to the Nghi Son refinery and petrochemical project stipulated in the GGU (government guarantee and undertaking).

The document clearly says that the Nghi Son Oil Refinery and Petrochemical Company Ltd will be able to export petrochemical and sulphur products at any times, while the export products will not bear the export tax.

The Vung Ro’s investor has got the approval to increase the capacity by two folds to 8 million tons of crude oil a year. Some sources have said the new investment capital has increased to $3.18 billion.

Meanwhile, Dau tu has quoted an experienced oil and gas expert as saying that with the capacity of 10 million tons of crude oil a year, the Nghi Son petrochemical and oil refinery project, invested by Japanese and Kuwaiti groups has the investment capital of $9 billion a year.

As such, the Vung Ro project with the estimated capacity of 8 million a year needs to have big investment capital, which must be much higher than the predicted $3.18 billion level.

Sources have said that the overall design of the Vung Ro petrochemical project would be completed by the end of the third quarter or early the fourth quarter of 2013.

If so, it is very likely that the EPC contract may be signed in 2013. It is highly possible that a Japanese enterprise which has experiences in executing petrochemical projects in Vietnam would become the contractor.

In the latest news, Thoi bao Kinh te Vietnam has reported that the Prime Minister has agreed to implement the controversial $27 billion oil refinery project in Vietnam.

Compiled by K. Chi