Russia's Gazprom Neft has asked to cancel talks on a proposed purchase of stakes in Vietnam's Dung Quat refinery, the developer of the country's sole oil processing facility has said.
In the immediate term, the suspended negotiation means that Gazprom Neft, the oil arm of top global gas producer Gazprom, will not buy 49 percent of the US$3 billion facility as planned, according to state-run oil and gas giant PetroVietnam.
PetroVietnam is the developer of the refinery, located in the central province of Quang Ngai, and its subsidiary, Binh Son Refining and Petrochemical Co. Ltd., is the operator.
Gazprom Neft had earlier called on Vietnamese ministries and industries to approve several preferential conditions for the company to buy the share of Dung Quat, as well as to expand the facility, according to PetroVietnam.
But the Ministry of Industry and Trade has responded, saying that Dung Quat could not continue to enjoy tax incentives after 2018.
Upon receiving the reply, the Russian firm sent a letter to PetroVietnam, requesting a halt to negotiations.
However, with the Dung Quat refinery slated to undergo privatization in the future, Gazprom Neft said it will consider buying the facility’s share once it goes public.
Commissioned in 2009, Dung Quat is processing 6.5 million tons of crude oil a year and the capacity will rise to 8.5 million tons once a projected upgrade is finished by 2022.
Last year Dung Quat posted a record VND5.8 trillion ($258.93 million) profit, according to PetroVietnam.
In April 2015, Gazprom Neft and PetroVietnam signed a memorandum to extend collaboration on joint oil and gas exploration, production and development projects on the Pechora Sea shelf northwest of Russia.
The Russian firm announced at the same time that it had exclusive rights to negotiate with PetroVietnam on acquiring 49 percent of the refinery, as part of the energy cooperation pact.
Energy cooperation has long been a feature of the relationship between Vietnam and Russia, starting with the construction of hydropower plants in the Southeast Asian country during the 1980s, followed by the oil and gas joint venture Vietsovpetro, according to Reuters.