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Viewing cable 07HOCHIMINHCITY48, DUNG QUAT INDUSTRIAL ZONE MAKES SUBSTANTIAL PROGRESS

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Reference ID Created Released Classification Origin
07HOCHIMINHCITY48 2007-01-12 13:23 2011-08-25 00:00 UNCLASSIFIED Consulate Ho Chi Minh City
VZCZCXRO6849
RR RUEHCHI RUEHDT
DE RUEHHM #0048 0121323
ZNR UUUUU ZZH
R 121323Z JAN 07
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC 1986
INFO RUEHHI/AMEMBASSY HANOI 1448
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHHM/AMCONSUL HO CHI MINH CITY 2151
UNCLAS HO CHI MINH CITY 000048 
 
SIPDIS 
 
USDOC 
SIPDIS 
 
DEPT FOR EAP/MLS 
USDOC FOR 4431 (MAC/AP/OPB/VLC/HPPHO) 
 
E.O. 12958: N/A 
TAGS: ECON PREL ETRD VM
SUBJECT: DUNG QUAT INDUSTRIAL ZONE MAKES SUBSTANTIAL PROGRESS 
 
 
1. Summary:  The USD 2.8 billion Dung Quat refinery and oil 
port project in Quang Ngai Province has been widely 
criticized as uneconomic.  However, it is well on its way 
to opening in 2009 and could become the anchor for 
developing a major heavy industrial zone.  A Vinashin 
shipyard is close to completion at Dung Quat and a major 
Taiwanese steel plant has been announced.  Quang Ngai is 
both poor and isolated but the province has a plentiful 
supply of labor and undeveloped land.  Newly installed 
provincial leadership is business-focused and keen to use 
Dung Quat to drive investment and development. End Summary. 
 
2. Consul General visited Quang Ngai Province and the Dung 
Quat industrial zone December 11.  The Zone is just south 
of the Chu Lai industrial zone in Quang Nam Province and 
the old U.S. airbase at Chu Lai can be seen from Dung Quat. 
Mr. Dung Viet Hoang, PetroVietnam's Deputy Project Manager 
for the refinery, stated that construction began in March 
2006 and is expected to be completed in 2009 at a total 
cost of USD 2.8 billion.  The project is being funded by 
the GVN both directly from the budget and through domestic 
borrowing.  French engineering firm Technip is the prime 
contractor.  Stone and Webster of the U.S. serves as the 
owner's engineer (OE).  Construction is about 25 percent 
complete in value terms with the foundations and seawater 
intake and pumping stations largely in place.  Refinery 
components are under construction around the world and will 
be delivered by sea to the still under construction port. 
Once completed, crude oil will be delivered by tanker from 
Vietnam's offshore platforms to the south via an unloading 
buoy and refined product will be pumped 1.6 km to the new 
deepwater port.  In a later phase, a container terminal 
will be added to the port as well. 
 
3. The Dung Quat refinery project was on the drawing boards 
for over a decade before construction began last year. 
Vietnam's petroleum production and consumption is roughly 
in balance, but all crude is exported and all refined 
products imported.  The decision to build Vietnam's first 
refinery in Quang Ngai Province was primarily political. 
The site is neither close to the offshore oil rigs nor to 
the market.  Foreign investors, including from Russia, 
shied away from the project leading the GVN to decide to 
finance the development itself.  A number of experts have 
claimed that oil refined at Dung Quat, a mid-sized plant by 
international standards, may be more expensive than 
imported product. 
 
4. Whatever the economics of the refinery, the project is 
anchoring development of a heavy industrial zone.  State- 
owned Vinashin is close to opening a new shipyard in the 
zone, likely financed with the proceeds the GVN's 2005 750 
million international bond sale, proceeds of which were 
turned over to the shipbuilding firm.  Taiwan's Tycoons 
Steel Company has also been granted a license to build a 
steel mill.  With both vacant land zoned for industry and a 
plentiful supply of labor available, Dung Quat will develop 
into an industrial center according to Provincial People's 
Committee Chairman Nguyen Xuan Hue.   A wounded Viet Cong 
veteran, Hue has been in office since May 2006 and ran the 
province's Department of Planning and Investment before 
that.  He came up through the ranks of the provincial sugar 
company, which he built and expanded into a diversified 
food and beverage group.  Hue has a clear vision for his 
provinces development and an understanding of business that 
bodes well. 
 
WINNICK