UPDATE 2-BP to supply up to 70,000bpd oil to Vietnam refinery

(Updates with government confirmation, more quotes)

By Nguyen Nhat Lam

HANOI, Jan 13 (Reuters) - BP Plc will supply Petrovietnam with up to 70,000 barrels per day (bpd) of foreign crude for the country's new Dung Quat refinery, which needs to invest another $1 billion to upgrade to process lower-quality crudes by 2011.

Under a contract signed on Monday but made public on Tuesday, BP (BP.L: Quote, Profile, Research) would supply sour crude oil to replace Vietnam's flagship Bach Ho grade, now used as the only feedstock to the 140,000-bpd Dung Quat refinery, Petrovietnam officials have said.

"The signing of this contract opened a new direction for the refining industry in Vietnam and would make an important contribution to meet demand from the domestic market, which now relies 100 percent on product imports," a government report quoted Petrovietnam Deputy Chief Executive Vu Quang Nam as saying.

Petrovietnam would have to invest up to $1 billion to add a "desulphuriser component" to enable it to process sour, or high sulphur, crude at the refinery that is slated to come onstream on Feb. 25 after more than a decade of planning, a company official said. The complex already costs $2.5 billion to build.

Chief Executive of Petrovietnam's crude trading arm PV Oil, Nguyen Quoc Khanh said in the government report, the refinery would only need to import foreign crude oil from 2011.

In the meantime, BP could also supply sweet crude to the refinery if the imported grade is cheaper than, but similar to, the domestic Bach Ho crude, a Petrovietnam official said.

"Until then, the refinery would only run on the light sweet Bach Ho or similar grade if BP can find, but it has to be cheaper than Bach Ho," said the official who declined to be named due to company policy.