The proposed $5.4-billion Long Son petrochemicals project in southern Vietnam is currently delayed due to a financing problem, state-owned PetroVietnam's general director Nguyen Vu Truong Son told a working group of the central government in a meeting on July 19, a recording of it was obtained by S&P Global Platts.
PetroVietnam holds 29% stake in the project in the Ba Ria Vung Tau province with the remaining 71% owned by Thailand's Siam Cement Group.
So far, site clearance work has been completed. The investors have chosen an engineering, procurement and construction contractor for the project, Son said, without providing any name.
They plan to borrow $3.2 billion out of the total $5.4 billion from financial institutions for development of the project with the remainder funded by themselves.
But final decision is yet to be made and construction could not begin because PetroVietnam is prohibited by law from providing a backup loan guarantee for its Long Son Petrochemicals Company Limited, the investor of the project.
Long Son is classified as a key project in the oil and gas sector and thus falls under the ones that may receive the government's loan guarantee. The Vietnamese government, however, has refused to provide a loan guarantee for the project for fears of mounting public debt, according to Son.
Siam Cement Group has pledged to provide guarantee for the $3.2 billion package. But it asked PetroVietnam to issue a commitment to Long Son Petrochemicals to guarantee the 29% portion of the $3.2 billion that the Thai company will borrow on behalf of the Vietnamese one.
PetroVietnam, however, could not issue such a loan guarantee for Long Son Petrochemicals because a Vietnamese law currently prohibits a state-owned company from providing loan guarantee for a subsidiary that it holds below 51% stake in, PetroVietnam's general director said.
"Construction could begin in August or September if this issue is handled," Son said.
A representative of the Ministry of Finance said at the meeting the ministry has urged PetroVietnam to report the issue to Prime Minister Nguyen Xuan Phuc for consideration.
Mai Tien Dung, minister and chairman of the government's office, also asked relevant parties to look for flexible ways to push the project forward as it will make great contribution to the country's economic growth.
The Long Son petrochemicals complex will revolve around a 1 million mt/year steam cracker with flexible gas and naphtha feed to yield in total olefins capacity of up to 1.6 million mt/year depending on the feedstock mix.
The cracker will have the flexibility to utilize gas up to 80% of total feedstock, and will be fully integrated to the downstream polyolefins capacities of similar scale.
The project is expected to start up in 2021.
