L Th Thu Huyn ID:1001010457 August 23, 2013

Nghi Son Refinery project in Thanh Hoa Province

I. Overview Location: Nghi Son Refinery is the second planned oil refinery in Vietnam. It would be located about 200 kilometres (120 mi) south of Hanoi in Tinh Gia District of Thanh Hoa Province. Technical features: Nghi Son refinery would have a designed capacity of 10 million tons of crude oil per year with possibility to increase the capacity to 20 million tons. It is expected to cost $6.2 billion. In addition to LPG(liquefied petroleum gas), unleaded gasoline, kerosene, jet fuel, diesel and FO (fuel oil), the refinery is projected to produce bitumen, propylene and BTX(benzene, toluene, and the three xylene isomers) as a raw material for the petrochemical industry. Supply: Crude oil may come from the Su Tu Den (Black Lion) oilfield off
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Vietnam's southern coast, and imports from the Middle East.

Capital: The total investment for this project is $9 billion including $4 billion from

4 investors: Petro Vietnam Oil Corporation(PVN) holds 25.1%, Kuwait Petroleum Europoort (KPE) holds 35.1%, Idemitsu Kosan Co. (IKC) holds 35.1%, Mitsui Chemicals Inc. (MCI) holds 4.7%. MODE OF ENTRY: Joint-venture with local company- Petro Vietnam Oil Corporation. Contractor for this project is a group of contractors including company JGC (Japan) as the head contractor and the other members which are: Chiyoda (Japan), GS E & C (Korea), SK E & C (Korea), Technip France (France), Technip Geoproduction (Malaysia).2 This project is one of the national key projects, with the largest FDI in Vietnam up to the present time. The project is very important to the economy, society, national defense and security, contributes to the industrialization and modernization of Thanh Hoa province as well as North Central and Vietnam. Recently, on 22nd July 2013, the Management Board of Nghi Son Economic Zone (Tinh Gia District, Thanh Hoa province), the People's Committee of Thanh Hoa province had officially hand over, delivered the certificate of land use right and granted the construction permit for the Project Contact Nghi Son petrochemical complex. (Besides Nghi Son refinery, as planned, Vietnam, in 2025, will have a series of refineries : Dung Quat oil refinery, Vung Ro oil refinery in Phu Yen (expected to be completed in 2016-2017), Nam Van Phong Refinery in Khanh Hoa Province (expected to be completed

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http://en.wikipedia.org/wiki/Nghi_Son_Refinery http://www.tienphong.vn/KinhTe/611901/KyhopdongEPCduan9tyUSDlochoadauNghiSon tpov.html

in 2020) Long Son oil refinery, also known as No. 3 oil refineries in Ba Ria-Vung Tau (expected to be completed in 2020) and Can Tho oil refinery.) II. Vietnam FDI current status

Vietnam investments from 2007 up to now3

In the past five years, implemented (or disbursed) FDI has hovered between $10.5 to $11.5 billion. This has been viewed as a sign of foreign investors continued commitment to Vietnam, that they are undeterred by problems of macroeconomic instability or slowdown in structural reforms. Implemented FDI as a share of GDP, however, has been steadily falling over the past six years, from a peak of 12 percent of GDP in 2008 to 7 percent in 2012. Despite a falling FDI/GDP ratio, and continued macroeconomic problems including slow growth rate, high expected inflation; Vietnam is still considered to be one of the most attractive destinations for foreign investors in the East Asia region largely on account of its low wages, favorable demography, ideal location and political stability. III. 1. Discussion: Why Vietnam?

Why Japanese companies want to invest into Vietnam while this economy is on its way to recover after the crisis with the low growth rate? Revenue-related motives: o Sources of demand: with a population of more than 90 million, demand for gasoline in Vietnam is projected 23.95 million tons and 35.2 million tons 2015 and 2020, respectively. Potential development of the petroleum industry in VN is very large. Currently, supply is mainly from imports (for example, in 2010, 11.6 million tons of imports in the total consumption of 16.3 million tons of gas).4 The international demand for gasoline is also increasingly bigger.

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WorldBank,July2013,TakingstockAnupdateonVietnamsrecenteconomicdevelopmentreport http://www.vietfin.net/tinhhinhcungxangdautaivietnam/

Profitable market: Vietnam has a huge amount of motorbikes and automobiles together with very high price for gasoline.

Raw materials: Vietnam is a member of OPEC with the oil reserves of 1.7 billion

tons discovered and 6 billion tons forecasted.5 This would be the source of material for oil refining industry in Vietnam. Japan is the largest FDI investor of Vietnam. Vietnam government also strongly supports FDI and ODA from Japan. Investing in Vietnam, Japanese company will have political advantages compared investing into other countries. 2. Why Nghi Son, Thanh Hoa? Deep water port of Nghi Son, Thanh Hoa is available for ships up to 300,000 DWT. This is one of the most suitable location to build a deep water port in the North region. This makes the transportation by sea for importing and importing as well as for carrying crude oil from oil fields much easier and less costly (from and to Japan, Singapore, Hai Phong, Da Nang, and Ho Chi Minh City). Nghi Son EZ is considered as a key development area of the northern economic area, a bridge between the North and the Central regions, it locates on the North - South traffic route. This shortens the length of transportation by road to both the North and the Central as well as the South areas. In Nghi Son EZ, there is already Nghi Son Cement. If we plan to build the oil The investment project in Nghi Son EZ, besides enjoying the policies applicable to refinery there, it will be more convenient. areas with socio-economic difficulties and applied policies for economic zones in Vietnam under the Investment Law and the regulations, are entitled to the corporate income tax rate of 10% for 15 years, income tax exemption for 4 years and 50% reduction for the next 9 years, the export tax exemption for 5 years to buy raw materials for production. 3. The disadvantages of locating the oil refinery in Nghi Son, Thanh Hoa The North Central region (Bc Trung B) in Vietnam is rich in sea resources including tourism and fishing & aquaculture production. The development of many industrial zones and factories here, especially oil refineries will have bad influence on sea environment and the fishing & aquaculture production. This also pollute the atmosphere and the expansion of industrial zones can lead to the deforestation in the North Central region. The tourism industry will also be badly affected. There will be more oil refineries than there should be: the first reason is that the total capacity of all oil refineries in Vietnam will exceed the domestic demand, the 2nd reason is the depleted oil resources in Vietnam and globally, the 3rd is clean and renewable energy, not fuel is the target of the other countries.

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