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UPDATE 1-Start-up of Vietnam's Nghi Son oil refinery delayed to 2018
May 15, 2017 / 8:49 AM / 4 months ago

UPDATE 1-Start-up of Vietnam's Nghi Son oil refinery delayed to 2018

* Delayed to Q1 2018 at the earliest

* Supportive of oil product margins, to weigh on crude oil

* Issues tender to charter 27 VLCCs to ship oil from Kuwait (Adds details, background)

By Jessica Jaganathan and My Pham

SINGAPORE/HANOI, May 15 (Reuters) - The commercial start-up of Vietnam’s new $7.5 billion Nghi Son oil refinery will be delayed to 2018, from an initial expected start-up in the third quarter of this year, according to a notice on a government website.

The 200,000 barrels-per-day (bpd) oil refinery is now planning to start commercial operations in the first quarter of 2018, according to a notice on the website for Deputy Prime Minister Vuong Dinh Hue and a source close to the matter.

Trouble with a mechanical test on some of the refinery’s components set back test runs at the plant, causing the delay, according to the notice.

A spokesman for Nghi Son did not immediately reply when contacted by Reuters.

The start-up delay should defer an expected decline in product margins until after Nghi Son starts operating, said Nevyn Nah, an oil analyst with consultancy Energy Aspects.

“The impact on margins will be shifted to mid-2018 if the refinery is commissioned in first quarter of next year,” he said.

Vietnam’s imports of oil products were expected to fall after Nghi Son began operations.

The delay of additional fuel supplies in Asia could be good news for refiners, a trader with a North Asian refinery said.

Still, it could weigh on the crude oil market, a Singapore-based crude trader said.

The refinery was expected to take delivery of its first crude oil in May and send out its first oil products by the third quarter of the year, the company said in February.

The plant is Vietnam’s second refinery and will process Kuwaiti crude oil to produce liquefied petroleum gases, gasoline, diesel, kerosene and jet fuel, mainly for the domestic markets.

Kuwait now has less demand for its crude after shutting its 200,000 bpd Shuaiba refinery in April and this is expected to continue until Nghi Son starts, four crude traders said.

Nghi Son Refinery sent out requests to shipbrokers earlier this month to charter 27 very large crude carriers, ships capable of carrying 2 million barrels of oil each, over July 2017 to June 2018 to transport crude from Kuwait to the refinery, according to a tender document seen by Reuters.

Japan’s Idemitsu Kosan and Kuwait Petroleum International each own 35.1 percent of Nghi Son Refinery and Petrochemicals, while PetroVietnam has 25.1 percent and Mitsui Chemicals 4.7 percent.

Vietnam’s existing Dung Quat refinery meets about 30 percent of domestic demand. (Reporting by Jessica Jaganathan, Roslan Khawsawneh and Florence Tan in SINGAPORE and My Pham in HANOI; Editing by Tom Hogue and Christian Schmollinger)

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