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Hyundai Engineering to build water plant at Long Son

Released at: 14:31, 08/08/2017

Hyundai Engineering to build water plant at Long Son

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Company wins $320 million order to build water supply and treatment plant at petrochemical complex in Ba Ria Vung Tau.

by Quang Huy

South Korea’s Hyundai Engineering Co. has secured a $320 million order to build utility facilities at what will be the biggest petrochemical complex in Vietnam. 

The company announced on August 6 that it has signed a deal to build a water supply and treatment plant at the Long Son petrochemical complex in Ba Ria Vung Tau province, about 100 km southeast of Ho Chi Minh City. 

The project will be carried out on a turnkey basis, meaning Hyundai Engineering will be responsible for the entire construction, from design to test operations. The company estimates that construction will take 47 months after ground is broken. 

The plant will provide the industrial water and steam essential for the seamless operations of the petrochemical complex. A joint venture, which includes the Vietnam National Oil and Gas Group (PetroVietnam), has decided to invest $5.4 billion in building the petrochemical complex, which will be the largest of its kind in Vietnam once completed. 

The latest order is Hyundai Engineering’s second turnkey-based construction project in Vietnam, following the Ba Ria thermal power plant expansion project in 1999. It also designed the Mong Duong 1 coal-fired thermal power plant in northern Vietnam, which its sister company, the Hyundai Engineering and Construction Co., completed building last year.

PetroVietnam now holds a 29 per cent stake in the Long Son petrochemical project while Thailand’s Siam Cement Group (SCG) holds 71 per cent, after acquiring the entire 25 per cent interest previously held by Qatar Petroleum International (QPI) earlier this year for $36 million.

The two investors plan to borrow $3.2 billion out of the required $5.4 billion from financial institutions, with the remainder being self-financing.

SCG has pledged to provide a guarantee for the $3.2 billion package but it asked PetroVietnam to issue a commitment to Long Son Petrochemicals guaranteeing the 29 per cent portion of the $3.2 billion the Thai partner will borrow on its behalf.

Construction of the project cannot begin, however, as PetroVietnam is prohibited by law from providing a loan guarantee for the Long Son Petrochemicals Company, the investor in the project.

A State-owned enterprise is prohibited from providing loan guarantees for a subsidiary in which it holds less than 51 per cent. Though Long Son is classified as a key project in the oil and gas sector and thus falls under those that may receive government loan guarantees, the government has refused to provide such a guarantee for fears over mounting public debt, according to Mr. Nguyen Vu Truong Son, CEO of PetroVietnam.

“Construction could begin in August or September if this issue is cleared up,” Mr. Son said, adding that if things go smoothly, the project, which includes a 1 million ton ethylene cracker with a flexible gas and naphtha feed, allowing for an olefin capacity of up to 1.6 million tons per year, is expected to start in 2021.

Licensed in 2008, the complex was initially scheduled to commence construction in 2014 and begin commercial operations in 2017. It has faced several delays due to site clearance and the exit of QPI following a slump in global oil prices in 2014.

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