Vietnam's state-run Binh Son Refining and Petrochemical Co (BSR) and state oil marketer PV Oil have signed non-binding term agreements with two western trading companies to buy crude, BSR officials said on Friday. SOCAR Trading will provide 3 million barrels a month of Azeri Light crude and 2 million barrels a month of other types of crude to BSR's Dung Quat refinery between 2018 and 2021, the officials said.
Glencore Singapore will supply 2 million barrels of crude per month to Dung Quat between 2017 and 2021, they said, adding that the supply could increase to 3 million barrels per month in 2021-2025.
These are the maximum volumes that the trading companies will supply and the refinery has the option to lift less crude, BSR's Chief Executive Officer Tran Ngoc Nguyen told Reuters.
Crude demand growth in Asia, and especially Southeast Asia, "has been tremendous," Quek Chin Thean, Glencore Singapore managing director, said at the contract signing on Friday.
Vietnam is becoming a net crude oil importer as its output falls and as the country increases its domestic refinery capacity.
"The signing (of agreements) today will be one among tens and hundreds of similar acts in the future to compensate for the fall in domestic crude supply," BSR's Chairman Nguyen Hoai Giang told reporters on the sidelines of the signing ceremony.
Vietnam's crude production fell 10.6 percent in the first 11 months this year to about 273,000 barrels per day (bpd). The country had targeted production of more than 290,000 bpd.
The Dung Quat refinery currently processes about 6.5 million tonnes per year (tpy) of crude, or 130,000 bpd. But officials said production capacity will be increased to between 8.5 million and 9 million tpy in 2021, or 170,000 to 180,000 bpd.
Vietnam imported 4 million barrels of Azeri crude between January and November this year, Thomson Reuters data shows. The crude deals represent nearly double the volume of crude that Dung Quat can process, suggesting that the refinery is unlikely to import the full amount, two Singapore-based traders said.
Nghi Son Refinery and Petrochemical LLC (NSRP), Vietnam's second refinery, is scheduled to start up a 200,000 barrels per day complex in 2018.