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Cablegate: Vietnam's First Oil Refinery Takes Shape in Quang Ngai

VZCZCXRO8369
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHHI #2064/01 3450441
ZNR UUUUU ZZH
R 110441Z DEC 07
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 6868
INFO RUEHHM/AMCONSUL HO CHI MINH 4051
RUEHZS/ASEAN REGIONAL FORUM COLLECTIVE

UNCLAS SECTION 01 OF 02 HANOI 002064

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS AND EEB
USTR FOR DBISBEE
TREASURY FOR SCHUN

E.O. 12958: N/A
TAGS: ECON ENRG EAID EIND EWWT SOCI TRGY EINV EPET ETRD
BEXP, VM
SUBJECT: VIETNAM'S FIRST OIL REFINERY TAKES SHAPE IN QUANG NGAI
PROVINCE

REF: (A) Hanoi 1817 (B) Hanoi 1838

HANOI 00002064 001.2 OF 002


1. (U) Summary: On November 29, members of the Embassy's Economic
Section traveled to Central Vietnam's Quang Ngai Province to meet
with government officials and tour the site of what will be
Vietnam's first petroleum refinery, located in the nearby Dung Quat
Economic Zone. Quang Ngai Province is largely rural with an
agrarian economy. Officials estimate that 30 percent of the
province's urban population lives in poverty, increasing to 50
percent of those who live in the province's western mountainous
districts. Recent major floods killed 32 people, submerged tens of
thousands of homes and businesses, and caused major damage to local
infrastructure and crops. Officials asked the Embassy for help to
promote the province to American companies that seek to establish
light industrial concerns in Vietnam and to find official
development assistance (ODA) to build a water reservoir for
residents on the nearby island of Ly Son. End Summary.

2. (U) This is the third in a series of reports (Reftels) on trips
by Embassy and Consulate General personnel to understand better the
level of economic development and competitiveness in provinces
throughout Vietnam. On November 29, members of the Embassy's
Economic Section traveled to Quang Ngai Province to meet with
provincial officials and tour the Dung Quat Economic Zone and
refinery.

THE CENTER PLAYS CATCH-UP
-------------------------

3. (U) Despite a burgeoning population of 1.3 million people in
greater Quang Ngai City, Quang Ngai Province is largely rural with
an agrarian economy. With twelve districts spread over mountainous
terrain, coastal plain, and the nearby island of Ly Son, provincial
officials face significant logistical challenges in providing
services to its far-flung constituents. (Note: Quang Ngai Province
moved up eleven spots, to number 48, in the 2007 Vietnam Provincial
Competitiveness Index, but still lags near the bottom of the
64-member provincial pack. End Note).

4. (SBU) In a relaxed and open discussion with provincial officials,
Truong Quang Tuong, Quang Ngai's Director of Foreign Affairs,
estimated that 30 percent of the people in Quang Ngai Province live
in poverty (defined as less than USD 14 per month), increasing to 50
percent of those who live in the province's western mountainous
districts (Note: Vietnam's national poverty rate in 2006 was 16
percent. End note). He said that 47,000 people have disabilities
and claimed that as many as 17,000 people are afflicted with
symptoms of dioxide poisoning (Agent Orange). Moreover, he said the
province is beset by floods, drought, or typhoons nearly every year.
Recent major floods in the area killed 32 people, submerged tens of
thousands of homes and businesses, caused major damage to roads,
railways and bridges, and destroyed thousands of hectares of crops.
Director Tuong estimated flood damage at VND 150 billion
(approximately USD 10 million). He asked the Embassy to help
promote the province to American companies that seek to establish
light industrial concerns in Vietnam and to find official
development assistance (ODA) to build a reservoir on the island of
Ly Son to provide clean drinking water to the several thousand
people who live there.

In the Zone
-----------

5. (SBU) The Dung Quat Economic Zone stands as the centerpiece of
the Vietnamese government's efforts to stimulate economic
development in central Vietnam and help the region catch up with the
stellar growth of the country's north and south. According to local
officials, the zone is currently home to 102 industrial concerns
with a total capital of USD 5.7 billion. A few of the major
projects currently under development include state-run Vinashin's
ship building and repair facility, a Taiwanese-owned steel plant
with a capacity of 100,000 tons per year, the Korean-owned Doosan
heavy industry equipment factory, and polypropylene and carbon black
manufacturing facilities.

6. (SBU) The nucleus of the economic zone is the sprawling Dung Quat
Petrochemical Refinery Complex, where approximately 18,000 workers
are currently laboring to build Vietnam's first oil refinery and
what will eventually be central Vietnam's largest deepwater seaport
- overtaking Da Nang Port to the north. State-owned PetroVietnam is
financing the entire project after foreign investors, including
Russia's Zarubezhneft, withdrew from the venture due to concerns
over the refinery's location, far from the oil fields of southern
Vietnam. A consortium of foreign companies, including Spain's
Tecnicas Reunidas and Japan's JGC Corporation, is working to

HANOI 00002064 002.2 OF 002


complete the refinery, which includes a nearby tank farm and marine
loading terminal, in time for the scheduled February 2009 opening.
The facility will have an annual processing capacity of 6.5 million
tons of crude oil, or 130,000 barrels per day.

7. (U) Although crude oil is Vietnam's number one export, the
country presently imports all of its refined petroleum products due
to a lack of refining capacity. The Dung Quat Complex is the first
of five planned refineries in Vietnam. The Nghi Son Refinery and
Petrochemical Complex in northern Vietnam's Thanh Hoa Province is
scheduled to open in 2011 with an annual processing capacity of
seven million tons of crude oil. The third complex, in southern
Vietnam's Baria-Vung Tau Province, is scheduled to open in 2013.
The GVN also plans to open a 100 percent foreign invested refinery
near the seaport of Vung Ro in southern Phu Yen Province, and a
joint-venture refinery in Can Tho Province in the Mekong Delta.

MICHALAK

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