By J. Berkshire Miller
Japanese petroleum giant Idemitsu Kosan has announced that it will open a lubricant manufacturing and sales company in Haiphong City, Vietnam.
Company officials said the newly minted Idemitsu Lube Vietnam Co. Ltd. will construct lubricant blending facilities at a 60,000 square meter plant with a manufacturing capacity of approximately 35 million liters of lubricants per year. Idemitsu Lube Vietnam will have $23.3 million in registered capital and will focus production on engine oil for motorcycles, automobiles, general industrial lubricants and other related products.
Idemitsu, which sold 949 million liters of lubricants in its fiscal year ended March 2012, detailed its plans in an Aug. 16 announcement.
Despite a global economic slowdown, Vietnam has maintained steady growth and its gross domestic product (GDP) rose by 5.9 percent in 2011. Moreover this growth has been consistent – increasing at an average of 6.56 percent annually over the past five years according to World Bank figures. Vietnam’s emergence has been noticed by government officials and business executives in Japan who have been actively courting the country as a geopolitical and corporate ally.
Tokyo-based Idemitsu’s foray into the Vietnamese market is part of its strategy to enhance its network in the booming Southeast Asian country. The company labeled Vietnam as a “core business” interest in its 2011 financial consolidated report, mainly as a result of its significant investment in the Vietnam Nghi Son project which fulfills its strategy aimed at “business expansion through entry into growing overseas markets,” according to company officials.
The Nghi Son oil refinery, about 200 kilometers south of Hanoi, is slated to be operational by 2014 and have a crude capacity of 200,000 barrels per day. The refinery is expected to cost U.S. $8 to $10 billion.
The refinery does not anticipate producing base oil, company officials said.
Idemitsu holds a 35.1 percent stake as part of an international consortium tasked with developing the project. Kuwait Petroleum International, a unit of state-owned Kuwait Petroleum Corp., also holds a 35.1 percent share in the project. PetroVietnam and Mitsui Chemicals Inc. own 25.1 percent and 4.7 percent, respectively.
Idemitsu officials have confirmed that the establishment of the lubricant plant in Haiphong falls in line with its corporate priority of “enhancing functional materials business.” Entering into overseas lubricant markets has also been identified as one of Idemitsu’s investment priorities over the next three years.
The company’s lubricant business is still recovering after a tumultuous fiscal shock in 2011 resulting from the March 11 tsunami and earthquake in Japan and the extensive flooding in Thailand later that year. Despite this, company officials said, Idemitsu was able to reduce the downward pressure on its lubricant-based profits largely as a result of the strength of its investments in Southeast Asia, mainly through the expanded profits at its subsidiary in Indonesia, Idemistsu Lube Techno Indonesia.
They added that Idemitsu has been “emboldened to aggressively seek out foreign markets” as a result of the increased purchasing power of yen.