Photo: Duc Anh
Negotiations over stake purchase in oil refinery fall through as Russian company expresses dissatisfaction with conditions offered.
Russia’s Gazprom Neft Public Joint Stock Company is to drop its plans to purchase 49 per cent of PetroVietnam's stake in the Dung Quat Oil Refinery being developed by the Binh Son Refining and Petrochemical Company Limited (BSR) in central Quang Ngai province.
“We are ready but are not satisfied with the terms proposed,” Gazprom Neft Chairman Mr. Alexandr Dyukov was quoted by Russia's Sputnik as saying.
“Profit conditions were initially favorable but BSR is not ready to provide the conditions we expected, which result in lower profitability,” he said. “We cannot enter into a low profit investment.”
He added that the most important matter was identifying business performance indicators.
“At this moment Gazprom Neft does not agree with proposals from the Vietnamese partner,” he said. “When they are ready to provide better conditions we will agree.”
PetroVietnam announced early this year that Gazprom Neft had released an official document ending negotiations over purchasing the 49 per cent.
Gazprom Neft also said that the group will research opportunities to purchase shares in Dung Quat in the future.
In November 2013 Gazprom Neft and PetroVietnam signed a framework agreement on a share acquisition in Dung Quat and its modernization. Gazprom Neft expected to buy 49 per cent and propose plans to expand the oil refinery with investment of about $1.5 billion to $3 billion.
During negotiations, however, the valuations of the two sides were different and the handling of BSR’s debts was a complex issue. Negotiations were therefore brief and could not be completed within the valid timeframe contained in the agreement (i.e. prior to June 30, 2015).
On August 21 last year Gazprom Neft sent a petition to Vietnamese authorities proposing it be granted incentives and favorable conditions to take on the shareholding.
In a response in November last year, the Ministry of Industry and Trade (MoIT) confirmed that import tax incentives on products will not be available to BSR after 2018 and other incentives in corporate income taxes and value added taxes must comply with Vietnamese law.
On December 7 PetroVietnam sent a notice to Gazprom Neft on these constraints.
At the same time it also announced plans to equitize BSR in order to invite Gazprom Neft’s to become a strategic shareholder. However, the Russian group officially ceased negotiations and will research other opportunities in the future.