Many big investors show interest in Vietnam’s sole oil refinery

According to an equitization plan just approved by the Government, at the initial public offering (IPO) of Dung Quat Oil Refinery scheduled on January 17 next year, 7.79 percent of the refinery’s charter capital, equal to 242 million shares, will be sold at the initial price of VND14,600 per share, fetching the State roughly VND3.5 trillion (US$154.19 million).
After the IPO, the Ministry of Industry and Trade (MOIT) plans to continue transferring a 49 percent stake to strategic shareholders by 2018, which means that the State’s ownership ratio in Dung Quat will be lower than 50 percent. This will allow private investors to control the No 1 oil refinery in Vietnam.

The initial public offering of Dung Quat Refinery is due on January 17, 2018.

Tran Ngoc Nguyen, General Director of Binh Son Refinery and Petrochemical Co Ltd (BSR) that operates the Dung Quat Refinery, the company worked directly with 17 investment funds and the world’s leading conglomerates in the oil & gas sector, including Repsol (Spain), Gazprom (Russia), Kevcomp (United States), World Petro (United States) and MacronPetro Petroleum (Africa) and Petrolimex, where the Japanese JX Nippon Oil & Energy. Of the conglomerates, World Petro and MacronPetro Petroleum want to buy all allowed stake of 49 percent.
“Oil refineries really attract investors,” said Michel Tosto from Ban Viet Securities. 
According to BSR’s CEO Tran Ngoc Nguyen, the potential increase in the size of the IPO is backed by recent improvements in BSR’s business performance thanks to better market conditions and productivity.
In the first six months of this year, BSR recorded revenue of VND38.65 trillion ($1.7 billion), up 15 per cent year-on-year, and net profit of VND3.83 trillion ($168 million), a four-fold increase compared to the first half of 2016. In 2016, it had VND74 trillion of revenue and net profit of VND4.492 trillion, which means a rate of return on equity at 14 percent. 
BSR was valued at VND72.88 trillion ($3.2 billion) at the end of 2015, with the State holding a 60 per cent stake, according to a trade ministry report released earlier this year.
In the central province of Quang Ngai, Dung Quat meets around one-third of Vietnam’s demand for fuel and oil products and has the capacity to process 6.5 million tons of crude oil a year.
The company is planning to expand to meet as much as 45 per cent of domestic demand by 2022.
Under the current law, foreign investors are not allowed to distribute petrol products in Vietnam, unless they have oil refineries in Vietnam. 
Therefore, analysts predict that foreign conglomerates will buy a stake in Vietnam’s oil refinery to obtain the right to distribute petrol products. 
The Vietnamese energy market is witnessing the highest growth rates in the region. The total demand for petroleum products in Vietnam in 2015 was 17.5 million cubic meters. According to the World Bank, the average petroleum consumption per capita in Vietnam has increased by 5 percent per annum. The demand mostly comes from three sectors – transport (65 percent), industrial production (20 percent) and people’s consumption./.